Bubble or no bubble, this is the best stock for AI exposure: analyst
Investing.com - B.Riley downgraded Applied Optoelectronics (NASDAQ:AAOI) from Neutral to Sell on Monday, setting a price target of $15.00, which represents a potential 43% downside from current levels.
The downgrade comes despite the anticipated ramp-up with Amazon, as B.Riley believes a significant portion of this potential opportunity has already been priced into the stock. The firm maintained its 1.8x EV/sales multiple based on its 2026 revenue estimate minus net debt.
B.Riley noted that 2026 consensus revenue estimates for Applied Optoelectronics vary widely from $610 million to $1.29 billion, with an average of $828 million, reflecting market expectations for strong 400G and 800G demand from Amazon in 2026.
The research firm expressed skepticism about management’s projections, pointing out that the previously anticipated $300 million 400G AOC opportunity with Microsoft has not ramped as initially projected. B.Riley indicated it would give more credence to management’s expectations once Amazon qualification and meaningful purchase orders materialize.
B.Riley also highlighted competitive challenges, noting that while Applied Optoelectronics struggles to qualify its 800G products, the industry is already transitioning to 1.6T following Nvidia’s GB300 introduction, with several competitors already shipping 1.6T products in meaningful volume.
In other recent news, Applied Optoelectronics reported its third-quarter 2025 earnings, which showed a larger-than-expected loss per share and revenue slightly below forecasts. Despite missing earnings estimates, the company noted significant year-over-year revenue growth and ongoing strategic initiatives to expand its market presence. Additionally, Applied Optoelectronics announced a $180 million at-the-market equity program. This initiative involves an Equity Distribution Agreement with Raymond James & Associates, Inc. and Needham & Company, LLC, allowing the company to offer and sell shares of its common stock through designated sales agents. The sales will be conducted as "at the market" offerings, with transactions potentially occurring through the Nasdaq Global Market or other trading markets. These recent developments highlight the company’s efforts to strengthen its financial position and enhance its market strategy.
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