On Friday, Northland Capital Markets adjusted its price target for Applied Optoelectronics (NASDAQ:AAOI), a provider of fiber-optic networking products, to $18 from the previous $20. The firm maintained its Outperform rating on the stock. This change follows the company's fourth-quarter earnings report and outlook, which presented a mix of positive and negative developments.
Applied Optoelectronics reported a strong ramp-up in sales of 400G Active Optical Cables (AOC) during the fourth quarter, which helped to balance out weaker performance in the 100G segment. However, the company's forecast for the first quarter indicates a period of digestion for 400G AOC sales and continued softness in the 100G market.
Despite the near-term challenges, Northland Capital Markets remains optimistic about Applied Optoelectronics' revenue growth in the calendar year 2024. The firm anticipates non-GAAP profits for the company as the demand for 400G AOC is expected to rebound in the second quarter. Additionally, the introduction of 400G transceivers, the expansion into 800G, and growth in the Cable networks sector are projected to drive revenue in the second half of the year.
The firm's analysis suggests that the anticipated growth will have a more significant impact on the company's bottom line, despite higher operating expenses and a more conservative approach to gross margins. The guidance reflects the firm's confidence in Applied Optoelectronics' ability to navigate the current market dynamics and capitalize on upcoming opportunities in the high-speed data communication sector.
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