Assessing Applied Optoelectronics (AAOI) Valuation After Its Recent Share Price Rebound

Assessing Applied Optoelectronics After Its Recent Share Move

Applied Optoelectronics (AAOI) has been on a choppy ride lately, jumping about 8% in the latest session but still down for the year. This naturally raises questions about where this story goes next.

See our latest analysis for Applied Optoelectronics.

That 7.77% 1 day share price gain to around $29.25 comes after a sharp pullback, with a 30 day share price return of 40.02% but a year to date share price return still negative. This suggests momentum is rebuilding after an early setback.

If AAOI’s rebound has your attention, this could be a good moment to see what other high growth tech names are doing through high growth tech and AI stocks.

With shares still below analyst targets but coming off a steep rebound, the key question now is simple: is AAOI quietly undervalued ahead of its next cycle, or are investors already paying up for tomorrow’s growth?

Most Popular Narrative Narrative: 4.4% Undervalued

Compared to the last close at $29.25, the most followed narrative pegs Applied Optoelectronics’ fair value slightly higher at about $30.60, implying modest upside if its growth story plays out.

Internal manufacturing advancements, such as transitioning laser wafer production from 2" to 3" and eventually 4", and increasing vertical integration in laser and silicon photonics, are expected to deliver substantial cost reductions and support the company's targets for gross margin expansion to between 35% and 40% by late 2026, benefiting both net margins and long-term earnings power.

Read the complete narrative.

Curious how aggressive revenue growth, a sharp swing from losses to profits, and a future earnings multiple all combine into that valuation call? The full narrative unpacks the precise assumptions, timelines, and profitability targets that need to line up for this fair value to hold.

Result: Fair Value of $30.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the company’s concentrated reliance on a few major customers and its heavy ongoing capital spending could quickly challenge the optimistic growth and margin assumptions supporting this narrative.

Find out about the key risks to this Applied Optoelectronics narrative.

Another Angle on Valuation

On a simple sales based lens, AAOI looks expensive, trading at 4.7 times revenue against a fair ratio of 4.4 times, 2.2 times for peers and 1.8 times for the wider US communications group. That premium prices in a lot of hope, so what happens if execution wobbles?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Applied Optoelectronics Narrative

If you see the story differently or want to stress test the assumptions with your own inputs, you can build a custom view in minutes: Do it your way.

A great starting point for your Applied Optoelectronics research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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