Analyst: Most Investors Underestimate This Tech Stock

AAOI remains stuck below recent resistance, though

Managing Editor
Sep 14, 2018 at 9:58 AM
facebook X logo linkedin


Shares of fiber-optic network component producer Applied Optoelectronics Inc (NASDAQ:AAOI) are up 2.2% to trade at $34.54, after Cowen and Company raised its price target to $55 from $53. The analyst in coverage waxed bullishly on the Facebook supplier's 100G data center transceivers, and thinks "most investors continue to underestimate AAOI's ability to compete effectively and to drive profitable growth." 

The new price target represents a 59% premium to the stock's current perch, and a level AAOI has not traded above since a mid-October bear gap. The stock has had a choppy summer -- rallying all the way up to familiar resistance in the $48-$50 range in June and July, before tumbling to a four-month low below $32 earlier this month. Overall, the equity has given back 8.7% in 2018. 

Shorts have been heading for the exits, and any extended uptrend could encourage more bearish bettors to buy back their shares. Short interest fell by 26% in the most recent reporting period, yet the 6.80 million shares sold short still represents a whopping 40% of AAOI's total available float, or nine times the average daily trading volume.

Options traders have been almost exclusively targeting AAOI calls.  At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day call/put volume ratio of 5.78, which ranks in the 95th annual percentile. This shows the rate of call buying relative to put buying has been quicker than usual.

While some of this activity could be at the hands of shorts hedging against any upside rise, the good news for any those purchasing premium is that near-term options are attractively priced right now, from a volatility perspective. This is based on AAOI's Schaeffer's Volatility Index (SVI) of 54%, which arrives in the 10th percentile of its annual range.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI