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Applied Optoelectronics (AAOI)
NASDAQ:AAOI
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Applied Optoelectronics
(NASDAQ:AAOI)47Neutral
Positive Factors
Customer Diversification
Oracle was a new 10% customer, indicating potential for diversified revenue streams.
Negative Factors
Growth Uncertainty
Management expects 800G to ramp up, but it hasn't been qualified by any hyperscalers yet, which poses uncertainty.
Revenue Concerns
CATV strength may not be sustainable, raising concerns about future revenue sources.
Applied Optoelectronics (AAOI) vs. S&P 500 (SPY)
Market Cap
$785.49M
Dividend YieldN/A
Average Volume (3M)4.20M
Price to Earnings (P/E)―
Beta (1Y)3.04
Revenue Growth14.57%
EPS Growth-139.27%
CountryUS
Employees2,149
SectorTechnology
Sector Strength48
IndustryHardware & Equipment
Share Statistics
EPS (TTM)-4.29
Shares Outstanding49,651,480
10 Day Avg. Volume5,996,349
30 Day Avg. Volume4,198,749
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.15
Price to Cash Flow (P/CF)-8.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.00Price Target Upside89.63% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
Applied Optoelectronics Business Overview & Revenue Model
Company DescriptionApplied Optoelectronics, Inc. (AAOI) is a leading provider of fiber-optic networking products. The company operates primarily in the telecommunications, datacenter, and cable television broadband sectors. It specializes in the design and manufacture of advanced optical components, including laser chips, modules, and subsystems, which enable high-speed data transmission over fiber optic networks.
How the Company Makes MoneyApplied Optoelectronics generates revenue through the sale of its fiber-optic networking products and solutions. Key revenue streams include the sale of laser chips, optical transceivers, and other optical modules to customers in the telecommunications and datacenter industries. The company also earns income from providing integrated solutions that enhance network performance and connectivity. Strategic partnerships with major technology companies and service providers, along with investments in research and development, contribute significantly to its earnings by facilitating innovation and meeting the evolving demands of high-speed data transmission.
Applied Optoelectronics Financial Statement Overview
Summary
Applied Optoelectronics shows revenue growth but struggles with profitability and cash flow. Despite a stable equity base and improved liquidity, high net losses and negative cash flow metrics pose significant financial risks.Income Statement
The company's income statement reveals consistent revenue growth, with a 14.57% increase in 2024 compared to 2023. However, profitability remains an issue, as evidenced by persistent negative EBIT and net income, indicating ongoing operational challenges. The gross profit margin improved to 24.78%, but the net profit margin deteriorated to -74.89%, showing increased losses.45
Neutral
Balance Sheet
The balance sheet shows a stable equity base, with stockholders' equity increasing to $229.1 million. The debt-to-equity ratio rose to 0.75, slightly increasing leverage but remaining manageable. The equity ratio decreased to 41.88%, indicating moderate reliance on debt financing. Improved cash reserves enhance liquidity, but financial stability is still a concern due to significant liabilities.50
Neutral
Cash Flow
Cash flow analysis highlights a negative free cash flow, worsening to -$112.9 million, indicating substantial cash outflows. The operating cash flow to net income ratio is negative, reflecting inefficiencies in generating cash from operations. Despite increases in financing cash flow, overall cash management remains a challenge, impacting financial flexibility.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 249.37M | 217.65M | 222.82M | 211.56M | 234.62M | Gross Profit |
| 61.80M | 58.92M | 33.63M | 37.72M | 50.54M | EBIT |
| -70.91M | -41.35M | -59.00M | -56.77M | -46.13M | EBITDA |
| -159.26M | -26.18M | -36.88M | -23.17M | -20.86M | Net Income Common Stockholders |
| -186.73M | -56.05M | -66.40M | -54.16M | -58.45M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 67.43M | 45.37M | 35.59M | 41.14M | 43.42M | Total Assets |
| 547.03M | 389.19M | 408.26M | 454.46M | 480.81M | Total Debt |
| 171.60M | 121.07M | 150.02M | 142.65M | 154.92M | Net Debt |
| 104.17M | 75.71M | 114.43M | 101.51M | 111.50M | Total Liabilities |
| 317.92M | 174.32M | 223.59M | 199.89M | 202.91M | Stockholders Equity |
| 229.11M | 214.87M | 184.67M | 254.57M | 277.89M |
| Cash Flow | Free Cash Flow | |||
| -112.93M | -17.60M | -18.26M | -22.30M | -63.57M | Operating Cash Flow |
| -69.53M | -7.93M | -14.02M | -11.64M | -44.01M | Investing Cash Flow |
| -50.70M | -14.76M | -3.83M | -10.55M | -19.35M | Financing Cash Flow |
| 142.18M | 40.58M | 10.75M | 14.09M | 47.44M |
Applied Optoelectronics Technical Analysis
Negative
15.82
Price Trends
28.71
Negative
28.09
Negative
19.42
Negative
Market Momentum
-3.32
Positive
29.12
Positive
5.93
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAOI, the sentiment is Negative. The current price of 15.82 is below the 20-day moving average (MA) of 24.07, below the 50-day MA of 28.71, and below the 200-day MA of 19.42, indicating a bearish trend. The MACD of -3.32 indicates Positive momentum. The RSI at 29.12 is Positive, neither overbought nor oversold. The STOCH value of 5.93 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AAOI.
Applied Optoelectronics Risk Analysis
Applied Optoelectronics disclosed 37 risk factors in its most recent earnings report. Applied Optoelectronics reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Applied Optoelectronics Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Performance Comparison
AAOI
Applied Optoelectronics
15.82
1.51
10.55%
CIEN
Ciena
68.93
17.39
33.74%
LITE
Lumentum Holdings
62.11
15.24
32.52%
Applied Optoelectronics Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: -37.20% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed sentiment. While there is strong revenue growth and significant expansion in the CATV and datacenter segments, the company faces challenges with operating losses and high expenses. The outlook for Q1 2025 suggests potential operational challenges, although there is optimism about long-term growth.Highlights
Significant Revenue Growth
Total revenue reached $100 million, up 66% year-over-year and 54% sequentially, driven by strong performance in both datacenter and CATV segments.
CATV Segment Expansion
Revenue in the CATV segment was $52.2 million, increasing more than 4x year-over-year and more than doubled sequentially, driven by the shipment of 1.8 gigahertz amplifiers.
400G Product Growth
Revenue for 400G products increased 40% year-over-year and 70% sequentially, with increased adoption by datacenter customers.
Production Capacity Expansion
AOI is expanding production capabilities with new automated equipment in Texas and a new facility in Taiwan to cater to increased demand for 400G and 800G products.
Lowlights
Non-GAAP Operating Loss
Reported a non-GAAP operating loss of $2.5 million in Q4, compared to an operating income of $0.4 million in the previous year.
GAAP Net Loss
GAAP net loss for Q4 was $119.7 million, or a loss of $2.60 per share, including a $112 million one-time charge related to convertible notes.
High Operating Expenses
Total non-GAAP operating expenses were $31.5 million, up from $21.6 million in the prior year, driven by increased R&D spending.
Q1 2025 Outlook and Challenges
Q1 revenue is expected to be between $94 million and $104 million, with potential operational challenges due to capacity and manpower limitations during the Chinese New Year.
Company Guidance
In the fourth quarter of fiscal year 2024, Applied Optoelectronics reported revenue of $100 million, aligning with its guidance range of $94 million to $104 million, and a non-GAAP gross margin of 28.9%, within the projected 27.5% to 29.5%. The company experienced a non-GAAP loss per share of $0.02, consistent with guidance predicting a loss of $0.04 to earnings of $0.04 per share. Revenue from datacenter products stood at $44.2 million, marking an 8% sequential increase, while revenue for 400G products surged 40% year-over-year and 70% sequentially. The CATV segment generated $52.2 million, over four times higher year-over-year and more than doubling sequentially, largely due to shipments of 1.8 gigahertz amplifiers. The company anticipates further growth, planning significant CapEx investments ranging from $120 million to $150 million in 2025, with expectations of increasing production capacity for 800G and 1.6 terabit datacenter products. For the first quarter of 2025, AOI forecasts revenue between $94 million and $104 million, a non-GAAP gross margin of 29% to 30.5%, and non-GAAP net income ranging from a loss of $3.6 million to breakeven.Applied Optoelectronics Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Applied Optoelectronics Financial Strategy and Stock Issuance
Positive
Dec 23, 2024
Applied Optoelectronics announced the closure of an exchange agreement, swapping $76.7 million in 2026 Notes for $125 million in 2030 Notes, 1.487 million shares of common stock, and a cash amount covering accrued interest. This move is part of a broader financial strategy to extend the company’s debt maturity and improve financial flexibility by eliminating restrictive covenants from the 2026 Notes. Concurrently, the company conducted a registered direct offering, issuing 1.036 million shares to raise approximately $33.7 million, which will be used for general corporate purposes and potentially future acquisitions. These transactions are expected to reduce interest expenses and bolster the company’s cash position, with minimal additional shareholder dilution.
Private Placements and FinancingBusiness Operations and Strategy
Applied Optoelectronics Maneuvers Debt and Expands Offerings
Positive
Dec 20, 2024
On December 18, 2024, Applied Optoelectronics announced its entry into exchange agreements with holders of its 5.25% Convertible Senior Notes due 2026, exchanging approximately $76.7 million of these notes for $125.0 million principal amount of 2.75% Convertible Senior Notes due 2030, common stock shares, and cash. This strategic financial maneuver is intended to manage the company’s debt effectively and may affect the trading price of its common stock and new notes. Concurrently, AOI launched a Registered Direct Offering of its common stock, intending to use any net proceeds for general corporate purposes, including potential acquisitions, thereby potentially enhancing its market positioning and operational capabilities.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.