Roth Capital Shines Light on Two Volatile Stocks: Applied Optoelectronics Inc (AAOI), Yelp Inc (YELP)


Roth Capital analysts are weighing in on optical-components maker Applied Optoelectronics Inc (NASDAQ:AAOI) and review giant Yelp Inc (NYSE:YELP) as both turned extremely volatile following earnings announcements.

Applied Optoelectronics Sinks on Guidance Slash, Roth Capital Remains Positive

Applied Optoelectronics shares lost nearly a quarter of their value today, after the company surprised investors with a sequential guide down due to a slowdown in purchases of its 40-gigabit optical transceivers by a single large customer.

Roth Capital analyst Brian Alger  commented, “While a transition from 40G to 100G was always anticipated, the rate of decline caught both the company and investors off guard. Somewhat ironically, we believe this sets the company up for an even stronger FY:18 demand outlook […] In addition to adjusting our model for the near term customer order changes, our FY:18 EPS calculation benefits from a more favorable tax outlook due to the treatment of stock options. Although we have reduced our FY:18 revenues by ~$26.3million, our non-GAAP EPS rises by 55 cents. While we fully expect the Street to reset the valuation of AOI on the open Friday morning, we believe the medium to long term outlook for AOI remains robust and clearly profitable.”

As such, Alger reiterates a Buy rating on shares of Applied Optoelectronics with a price target of $90, which implies an upside of 24% from current levels.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Alger has a yearly average return of 30.6% and a 53% success rate. Alger has a 263.8% average return when recommending AAOI, and is ranked #124 out of 4625 analysts.

Out of the nine analysts polled in the past three months, seven are still bullish on Applied Optoelectronics stock, while one remains sidelined, and one is bearish. With a return potential of 16%, the stock’s consensus target price stands at $83.13.

Yelp Skyrockets on Back of Solid Q2 Results, Bearish Roth Capital Analyst Moves to Sidelines

It’s a very rewarding trading day for investors in Yelp with shares up over 27%, making the stock Wall Street’s bull of the day.

The reason? The online review platform reported solid second-quarter results and outlook, driven by better-than-expected paying advertiser accounts, improved advertiser revenue retention, and continued strength from self-serve/national ad sales channels and other newer revenue streams.

Also positive, YELP and GrubHub (NYSE:GRUB) announced a partnership where GRUB will acquire Eat24 for ~$250 million net after-tax proceeds. In return, YELP will gain access to GRUB’s marketplace leading network of local restaurants, expanding its online order enabled network from ~40,000 restaurants to ~75,000.

In reaction, Roth Capital analyst Darren Aftahi upgraded YELP stock from Sell to Neutral, while raising his price target to $35.00 (from $21.00), which still implies a downside of 11% from current levels. (To watch Aftahi’s track record, click here)

Aftahi commented, “While much of our long term thesis remains unchanged, citing that we believe YELP will need to continue to increase its sales force productivity and retargeting efforts to keep its customers and manage the decelerations in its user base through greater performance marketing spend, we believe there are many net positives near term and that the GRUB partnership brightens the outlook for YELP. Not only does it expand their restaurant network and customer base, it provides a fixed and recurring fee to YELP, which on the backs on continued investments in Yelp Wi-Fi, No Wait, Request a Quote, should help drive local traffic growth and monetization. In addition, the $200M share repurchase and ~$250M net cash proceeds from the Eat24 sale provide YELP with added flexibility and improve the near term outlook. As such we believe the near term positive are beneficial to YELP’s positioning, and thus we move our rating to Neutral, from Sell and raise our PT.”

Out of the 22 analysts polled in the past 3 months, 13 rate Yelp stock a Buy, while 9 rate the stock a Hold. With a downside potential of nearly 10%, the stock’s consensus target price stands at $36.06.