AAOI received no fewer than five price-target cuts and one downgrade after earnings
Fiber-optic networking producer Applied Optoelectronics, Inc. (NASDAQ:AAOI) reported a fourth-quarter adjusted earnings beat last night, but revenue fell short of estimates, and the company gave an unimpressive first-quarter forecast. As such, the shares of AAOI have fallen more than 21% to trade at $27.25 -- earlier hitting a new annual low of $26.93 -- and have received no fewer than one downgrade and five price-target cuts in response.
Diving deeper, brokerage firm Craig-Hallum downgraded the stock to "sell" from "hold," and cut its price target to $17 from $32 -- a level not breached since September 2016, and representing expected downside of 37.5% from the equity's current perch. The brokerage firm said it's skeptical that AAOI's data center transceivers supply agreement
with Facebook (FB) will add to growth. More broadly, analyst sentiment is already pessimistic, with seven of the 10 brokerages following the stock carrying "hold" or worse ratings.
This skepticism has been echoed in the options pits, too. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the networking concern with a 10-day put/call volume ratio of 2.77, ranking in the 98th percentile of its annual range. This suggests AAOI puts have been bought to open over calls at a faster-than-usual clip during the past two weeks of trading.
Furthering the bearish outlook, short interest on Applied Optoelectronics stock rose nearly 14% in the past two reporting periods to 12.39 million shares -- not far from its mid-September record high of 13.25 million shares. What's more, these bearish bets now accounts for a whopping 67% of the stock's total available float, and though AAOI is short-sale restricted today, shorts are firmly in control on a security that's now staring at a 30% year-to-date deficit.