Applied Optoelectronics (AAOI) is Well Positioned for a Datacom Recovery, Northland Capital Markets Reiterates Outperform

Northland Capital Markets analyst Tim Savageaux reiterated an Outperform rating and $7.00 price target on Applied Optoelectronics (NASDAQ: AAOI) after the company reported Q1 revenue of $52.3M up 5% y/y,
driven by better than seasonal strength in CATV optics flat seq at $25M with ATX Networks at 39% of total revs in the Q and a recovery in 5G fronthaul lasers in China driving a 60% seq increase in Telecom revs to $5.7M. Management guided for 10% sequential growth despite having to absorb $3M of supply headwinds. The company also announced AAOI's selection as a supplier of a range of 400G modules to a major hyperscale data center customer.

The analyst stated "We reduce our PT to $7 to reflect broader market weakness, but continue to see value in both AAOI's InP laser fab assets, CATV optics unit and prospects for a recovery in Datacom." "Despite citing $3M of China driven supply/lockdown headwinds in Q2, AAOI guided Q2 revs to $56-59M slightly ahead of our est at the midpoint. Cable networks is the primary driver of seq growth, with the company noting significant capacity additions taking quarterly revenue capacity well past the previous $28M/Q peak, with Cable expected to grow throughout the year. We maintain our revenue ests for 2H22 with Data Center likely to add to seq growth in Q3 and Q4, with upside potential given a more pronounced ramp relative to our modest assumptions of DC exiting the year at $26M with 40G revs declining and 100G flattish and AAOI exiting the year EBITDA positive."

For an analyst ratings summary and ratings history on Applied Optoelectronics click here. For more ratings news on Applied Optoelectronics click here.

Shares of Applied Optoelectronics closed at $2.61 yesterday.

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