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Opticals Taking Back Lost Market Share, According To Rosenblatt

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Opticals Taking Back Lost Market Share, According To Rosenblatt
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The optical market has undergone "interesting changes" and companies like Applied Optoelectronics Inc (NASDAQ: AAOI) could rebound.

The Analyst

Rosenblatt Securities' Jun Zhang.

The Thesis

Zhang's research in the optical market suggests Applied Optoelectronics gained incremental share of business from Facebook, Inc. (NASDAQ: FB) after facing challenges in 2017. The company may be able to grow its share around CWDM4, mostly due to aggressive pricing strategy and quality issues at rival Innolight.

Applied Optoelectronics may have seen "weak" performance in the first quarter, but the analyst's assumptions implies a "strong sequential rebound" in the second quarter.

"During our recent trip to Asia," Zhang wrote in a note, "we found that server demand is very strong and we believe data center deployments in both China and US are ramping quickly."

Zhang also found Finisar Corporation (NASDAQ: FNSR) is positioned to take back some of the share it lost at Alphabet's (NASDAQ: GOOG) Google, while Lumentum Holdings Inc (NASDAQ: LITE) is positioned to take back some lost share at Amazon.com, Inc. (NASDAQ: AMZN).

The analyst said CWDM4 module prices will likely fall below $200 in the fourth quarter, which is below a prior estimate of $230 to $250 per model.

Rosenblatt has a Buy rating on Lumentum.

Price Action

Shares of Applied Optoelectronics were higher by more than 10 percent Wednesday morning, while Lumentum was higher by 4.5 percent and Finisar was higher by 2 percent.

Related Links:

William Blair: Reports Of Apple-Related Problems At Finisar 'Profoundly Inaccurate'

Morgan Stanley's Guide On How To Play The Optical Space

Latest Ratings for AAOI

DateFirmActionFromTo
Feb 2018Cowen & Co.MaintainsOutperformOutperform
Feb 2018Craig-HallumDowngradesHoldSell
Feb 2018B. RileyMaintainsNeutralNeutral

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Posted-In: CWDM4 Jun Zhang Optical Stocks Optics Rosenblatt SecuritiesAnalyst Color Top Stories Analyst Ratings Best of Benzinga

 

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