Optical device and component manufacturer Applied Optoelectronics (AAOI) has suffered tremendous choppiness over the past two years. The dramatic shift in sentiment came from quality-control issues with the company’s 100G CWDM4 transceivers. Specifically, the laser component within the transceivers have failed after only thousands of operating hours.
Adding insult to injury, Rosenblatt analyst Jun Zhang reiterates a Sell rating on AAOI stock, with a price target of $15.00, which implies a downside of 22% from current levels. (To watch Zhang’s track record, click here)
“We believe the laser quality issue will negatively impact AAOI’s shipments to other potential clients. Although AAOI may achieve some progress for its 100G product at Amazon, we do not believe AAOI will ship its 100G CWDM4 to Amazon in the near term. Microsoft is AAOI’s second largest client, after Facebook. We believe demand from Microsoft has been stable and believe AAOI’s shipments to MSFT will be flat q/q in Q4,” the analyst added.
As of this writing, AAOI shares are down nearly 1% to $19.50.
Overall, TipRanks suggests caution has a slight grip on Wall Street analysts surveying the fiber-optic component maker. Out of 11 analysts polled in the last 3 months, 4 bet on AAOI stock, 2 hedging their bet, and 5 remain bearish. The 12-month average price target stands at $28.70, marking nearly 50% upside potential from where the stock is currently trading. (See AAOI’s price targets and analyst ratings on TipRanks)