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On Wednesday, Raymond (NSE:RYMD) James analyst Simon Leopold adjusted the price target for Applied Optoelectronics (NASDAQ:AAOI) shares, decreasing it to $36 from the previous $39, while continuing to recommend an Outperform rating for the stock. Currently trading at $26.41, the stock sits within a broader analyst target range of $14 to $44. According to InvestingPro data, AAOI has shown remarkable momentum with a 254.78% surge over the past six months, though it remains notably volatile. The revision in the price target was attributed to a perceived slowdown in the cable TV market, as indicated by recent reports from industry players Harmonic (NASDAQ:HLIT) and Vecima.
Leopold’s commentary highlighted that while the direct impact of slower activity at major cable TV operators on Applied Optoelectronics’ amplifier sales remains uncertain, it was deemed cautious to revise estimates accordingly. Despite this adjustment, the analyst’s outlook on the company’s datacenter business and potential for growth remains intact. He reiterated the expectation for sales to double in 2025, a significant jump from the current annual revenue of $209.55M. InvestingPro subscribers can access detailed financial health scores and 8 additional key insights about AAOI’s growth prospects.
The optimism is partly based on Applied Optoelectronics’ ongoing capacity expansions and recent awards, which Leopold believes will enable the company to capture at least 5% of the AI transceiver market. He also noted the competitive edge provided by the company’s U.S.-based manufacturing facilities.
In his report, Leopold did not alter his thesis regarding the company’s datacenter segment and its expansion plans. His forecast for the company’s sales doubling in 2025 remains unchanged, signaling confidence in Applied Optoelectronics’ growth trajectory despite the current market adjustments.
In other recent news, Applied Optoelectronics is facing a series of developments. The company has been accused by Culper Research of misrepresenting its prospects in the 800G transceiver market, causing a drop in the company’s stock. The accusations involve allegations of failed delivery promises to Amazon (NASDAQ:AMZN) and Meta (NASDAQ:META), as well as doubts about the company’s manufacturing capabilities.
In a contrasting development, Applied Optoelectronics has entered into a construction contract with Chyi Ding Technologies Co., Ltd., marking a significant expansion of its manufacturing capabilities. The contract, valued at 277 million New Taiwan Dollars, is expected to enhance the company’s operations and potentially provide additional revenue streams.
Analysts have also weighed in on the company’s prospects. Rosenblatt Securities increased its price target for Applied Optoelectronics based on the company’s strong demand for 400G products and its future earnings potential. However, B.Riley downgraded the company’s rating from Neutral to Sell due to concerns over a potential slowdown in the 400G market segment.
Finally, Applied Optoelectronics has initiated a patent infringement lawsuit against Eoptolink Technology USA Inc. The company is seeking both monetary damages and a permanent injunction against Eoptolink to prevent further alleged infringement of its patents. These are the latest developments for Applied Optoelectronics, as the company navigates a complex landscape of opportunities and challenges.
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