Applied Optoelectronics Set For Explosive Growth In AI Optical Tech By 2025, Says Bullish Analyst

Shares of Applied Optoelectronics Inc AAOI were recovering on Tuesday, after last week’s steep decline.

The company’s sales are poised to explode from mid-2024 onwards, "driven by AI 400+G Optical interconnects for Data Centers and DOCSIS 4.0 amplifiers for Cable networks," according to Rosenblatt Securities.

The Applied Optoelectronics Analyst: Mike Genovese initiated coverage of Applied Optoelectronics with a Buy rating and a price target of $23.

The Applied Optoelectronics Thesis: The AI 800+G Optical transceiver market is projected to reach $7.5 billion in 2025, with the total high-speed Datacom transceiver market valued at around $12 billion, Genovese said in the initiation note.

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“AAOI could potentially capture 10+% share of the total, suggesting our $485mn revenue forecast for 2025 may be conservative despite the 40% growth rate,” the analyst wrote.

Applied Optoelectronics’ gross margins expanded by more than 1,000 basis points to around 30% in 2023 and could continue to expand in 2024 and 2025, Genovese stated. “Our $1.15 EPS forecast for 2025 is 23% above consensus, and there is potential for upside to our number,” he added.

AAOI Price Action: Shares of Applied Optoelectronics were up 8.2% to $17.36 at the time of publication Tuesday.

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