Applied Optoelectronics Stock To $31?

Applied Optoelectronics (AAOI) stock has jumped 21% during the past day, and is currently trading at $45.23. Our multi-factor assessment suggests that it may be time to sell AAOI stock. We have, overall, a pessimistic view of the stock, and a price of $31 may not be out of reach. We believe there are only a couple of things to fear in AAOI stock given its overall Moderate operating performance and financial condition. But keeping in mind its High valuation, we think that the stock is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $2.9 Bil in market cap, Applied Optoelectronics provides fiber-optic networking products, including optical modules, lasers, transmitters, and turn-key equipment for data centers, cable TV, telecom manufacturers, and internet service providers.

[1] Valuation Looks High

This table highlights how AAOI is valued vs broader market. For more details see: AAOI Valuation Ratios

[2] Growth Is Very Strong

• Applied Optoelectronics has seen its top line grow at an average rate of 32.8% over the last 3 years
• Its revenues have grown 101% from $210 Mil to $422 Mil in the last 12 months
• Also, its quarterly revenues grew 82.1% to $119 Mil in the most recent quarter from $65 Mil a year ago.

This table highlights how AAOI is growing vs broader market. For more details see: AAOI Revenue Comparison

[3] Profitability Appears Very Weak

• AAOI last 12 month operating income was $-45 Mil representing operating margin of -10.6%
• With cash flow margin of -40.2%, it generated nearly $-169 Mil in operating cash flow over this period
• For the same period, AAOI generated nearly $-156 Mil in net income, suggesting net margin of about -37.0%

This table highlights how AAOI profitability vs broader market. For more details see: AAOI Operating Income Comparison

[4] Financial Stability Looks Very Strong

• AAOI Debt was $235 Mil at the end of the most recent quarter, while its current Market Cap is $2.9 Bil. This implies Debt-to-Equity Ratio of 8.3%
• AAOI Cash (including cash equivalents) makes up $137 Mil of $979 Mil in total Assets. This yields a Cash-to-Assets Ratio of 14.0%

[5] Downturn Resilience Is Weak

AAOI has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• AAOI stock fell 88.3% from a high of $12.83 on 16 February 2021 to $1.50 on 11 July 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 August 2023
• Since then, the stock increased to a high of $45.23 on 28 January 2026 $45.23

 
2020 Covid Pandemic

• AAOI stock fell 64.7% from a high of $15.60 on 15 January 2020 to $5.50 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 3 August 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read AAOI Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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