Why Applied Optoelectronics, Inc. Stock Dropped Today

MarketsMotley Fool

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.

Continue Reading Below

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.

10 stocks we like better than Applied OptoelectronicsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Applied Optoelectronics wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

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.