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Results: Applied Optoelectronics, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts
There's been a notable change in appetite for Applied Optoelectronics, Inc. (NASDAQ:AAOI) shares in the week since its quarterly report, with the stock down 20% to US$50.13. Revenues were US$270m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.07, an impressive 600% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the five analysts covering Applied Optoelectronics are now predicting revenues of US$2.38b in 2027. If met, this would reflect a huge 218% improvement in revenue compared to the last 12 months. Applied Optoelectronics is also expected to turn profitable, with statutory earnings of US$3.53 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.66b and earnings per share (EPS) of US$3.53 in 2027. Indeed we can see that the consensus opinion has undergone some fundamental changes following the latest results, with a substantial drop in revenues and some minor tweaks to earnings numbers.
See our latest analysis for Applied Optoelectronics
It will come as no surprise then, that the consensus price target fell 13% to US$135following these changes. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Applied Optoelectronics at US$178 per share, while the most bearish prices it at US$92.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Applied Optoelectronics' growth to accelerate, with the forecast 153% annualised growth to the end of 2027 ranking favourably alongside historical growth of 26% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Applied Optoelectronics to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also downgraded Applied Optoelectronics' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Applied Optoelectronics' future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Applied Optoelectronics going out to 2028, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Applied Optoelectronics (2 make us uncomfortable!) that you need to take into consideration.
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