Loop Capital Sets Street-Low AAOI Price Target

Short sellers and options bears have targeted AAOI stock

Sep 27, 2018 at 10:06 AM
facebook twitter linkedin

Loop Capital downgraded Applied Optoelectronics Inc (NASDAQ:AAOI) to "sell" from "neutral," and slashed its price target by $25 to $20 -- the lowest on Wall Street -- a 36.2% discount to last night's close at $31.34. Unlike a recent bullish note from Cowen, this brokerage firm said the fiber optics component maker is facing product quality issues and pricing headwinds.

In reaction, AAOI stock is down 13.7% to trade at $27.05, breaching long-term support in the $30-$31 region -- which has served as a floor since a late-April bull gap. More broadly, the security is down 28.5% year-to-date, with all rally attempts stalling out near the round $50 mark, home to a mid-October bear gap.

Short sellers are likely cheering today's plunge, even with the stock landing on the short-sale restricted list out of the gate. Short interest on AAOI jumped 5.2% in the latest reporting period to 7.15 million shares -- representing 42.7% of the stock's available float, or five times the average daily pace of trading.

A number of options traders appear to be profiting on the Applied Optoelectronics stock slide. Data from Trade-Alert indicates the weekly 9/28 31-strike and 31.50-strike puts were bought to open yesterday for respective volume-weighted average prices (VWAPs) of $0.35 and $0.53. Today, the ask prices on those calls were last seen at $4.05 and $5.00, respectively.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1