On Friday, Applied Optoelectronics (NASDAQ:$AAOI) shares plunged. As of 12:32 p.m. EDT, the Sugar Land, Texas-based company was trading 26% lower, after the company posted second quarter earnings.
What Does This Mean?
Applied Optoelectronics – which manufactures lasers and transceivers – posted second quarter results on Thursday. In the report, investors saw that earnings increased almost nine-fold in comparison to the 2016 quarter, coming in at $1.54 per share. Additionally, Applied Optoelectronics sales more than doubled from $55.3 million to $117 million. Both these figures surpassed Wall Street expectations, which forecast earnings of $1.32 per share on revenue close to $116 million.
The takeaway? The reported numbers were a lot better than expected, and Q3 earnings guidance of almost $1.37 per share also surpassed the analyst forecast of $1.31 per share. That said, revenue guidance halted at $111 million, which is down from analysts’ $123 million consensus estimate. As a result, it seems that the soft revenue expectation is outweighing Friday’s positive surprises.
What Does The Future Hold?
Needless to say, the company came into this earnings report on a full head of steam. Regardless of today’s haircut, the stock is still trading 210% higher year to date, and Applied Optoelectronics has offered a 460% shareholder return over the last 52 weeks.
In regards to the soft Q3 revenue outlook, this is based on lower sales of the 40-gigabit transceiver portfolio. Many speculate growth in the 100G product line will erase the 40G downtrend, however, product generation changeovers can affect the company in the short term. In Q2, 39% of Applied Optoelectronics data center sales were from the 100G lineup. Further, this is increasing at a 62% year-over-year rate. This is up from a 30% revenue share in Q1 and 20% two quarters ago.
Looking ahead, Applied Optoelectronics future belongs to 100G products. The company is already the first to market with 200-gigabit transceivers for data center communications.
Overall, investors might benefit more from focusing on the company’s impressive one-year market returns rather than this sudden correction, as Applied Optoelectronics is most definitely going places.
Featured Image: twitter
