Overlooked Stock: Applied Optoelectronics

Core Viewpoint - Applied Opto Electronics has recently achieved significant growth, highlighted by a new major order for 800 gig transceivers, contributing to a 52-week high in stock price and over 50% rally this month [1][6]. Company Overview - The company operates in the optical networking and data center connectivity sectors, with a market capitalization of approximately $3 billion [3]. - It primarily sells products in two markets: fiber optic technologies and networking technologies, including lasers and transceivers [3]. Sales Performance - Data centers account for about 38% of total sales, while the connected TV segment represents 62% [4]. - Overall sales grew by 82% year-over-year for the last quarter, with total topline sales increasing over 100% in the past four quarters [4]. - Despite a previous decline in stock price due to supply chain issues affecting transceiver availability, the stock has rebounded significantly [5][6]. Financial Projections - Earnings per share estimates indicate a loss of $0.38 for the current year, but a profit of $0.86 is expected next year, with sales projected to reach $460 million this quarter and $764 million the following year, reflecting over 50% topline sales growth [6][12]. Competitive Edge - The company has integrated a new remote management software system to optimize network performance, enhancing its value proposition in a competitive market [9][10]. - Major customers include Verizon, AT&T, Charter Communications, and Microsoft, providing substantial visibility in sales [11][12]. Market Dynamics - The optical networking market is becoming increasingly crowded, but Applied Opto Electronics is positioning itself with innovative solutions that improve economic returns per unit sold [9][10]. - Current stock price is around $40, above the midpoint target of $36, with a high target of $50 and a low target of $15, indicating varying analyst sentiments regarding future performance [13].