Why Applied Optoelectronics, Inc. Stock Dropped Today

What happened

Shares of Applied Optoelectronics Inc. (NASDAQ: AAOI) were down 10.3% as of 3:15 p.m. EDT Thursday after an analyst downgraded shares of the fiber-optic networking products specialist.

More specifically, Loop Capital Markets analyst James Kisner reduced his rating on Applied Optoelectronics to sell from hold and simultaneously slashed his per-share price target on the stock to $20 from $45. For perspective, shares closed yesterday at $31.34.

So what

To explain his bearish shift, Kisner asserted that quality-control issues for laser components within certain of Applied Optoelectronics' transceiver products could negatively impact both gross margins and its market share going forward. In addition, Kisner cited an increasingly difficult industry pricing environment for those products relative to his firm's previous expectations.

Now what

It likely doesn't help that Kisner isn't the only analyst to voice concerns for the optical industry and Applied Optoelectronics, in particular. Shares also plunged earlier this month after B. Riley's Dave Kang not only worried that demand for some AAOI optical products "has become choppy," but also warned that recently proposed tariffs could result in project delays from certain customers.

In any case, with shares still reeling from that earlier downgrade but trading well above their 52-week lows set in April, it's hard to blame investors for taking another step back from Applied Optoelectronics stock today.

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Steve Symington 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.