Why Applied Optoelectronics Stock Was Soaring This Week

News of an initial volume order of a product from a customer in a highly promising segment was providing plenty of power to Applied Optoelectronics (NASDAQ: AAOI) stock this week. Several analyst price target hikes added to the bullishness.

As of mid-session trading Friday, the advanced optical device maker's stock was up by nearly 23% in value, according to data compiled by S&P Global Market Intelligence.

800 reasons to be bullish

On Wednesday, Applied announced it had received the first bulk order of its 800 gigabits per second transceivers designed for data center use. It did not identify the client.

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Although Applied did not specify how much it would earn in revenue from the transaction, it did say that it placed the company on track to hit its target for shipments of the product by the end of this year. Should that occur, sales of the new transceivers alone this quarter would generate $4 million to $8 million for the company.

Meanwhile, that client has placed $22 million worth of orders for both 800 gigabits per second and 400 gigabits per second transceivers. $13 million of this has been delivered so far in the quarter.

Price target boosts

Applied might be emphasizing events in its current quarter because it fell short of the consensus analyst estimates in the previous frame. This is a key reason why the stock subsequently fell over the next few weeks before staging a recovery.

Personally, I'd be inclined to side with the bulls on Applied, as its revenue growth is very hot at the moment, and management is doing a decent job narrowing the company's net loss.

Analysts tracking the stock would likely agree. During the week two of them raised their price targets on it. The pair were Needham's Ryan Koontz and Rosenblatt pundit Mike Genovese. Koontz believes Applied is worth $43 per share (up from $38); he has maintained his buy recommendation. Genovese added $15 to his fair value assessment to make it $50 per share, and also kept his buy rating intact.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.