Editor's Note

The Internet of Things (IoT) depends on network infrastructure for its lifeblood. Without the growing wireless infrastructure of the Internet there would be no IoT. The vast majority of that network is built on fiber optic network cables.



NEW BULLISH Plays

AAOI - Applied Optoelectronics - Company Profile

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products primarily for Internet data center, cable television (CATV), and fiber-to-the-home (FTTH) networking end-markets. It offers optical modules, optical transceivers, lasers, transmitters, and turn-key equipment, as well as headend, node, and distribution equipment. The company sells its products to internet data center operators, CATV and telecommunications equipment manufacturers, and internet service providers through its direct and indirect sales channels worldwide.

This is a small but growing company. The share price has been volatile over the last year with a big drop on Q1 earnings that knocked it down from $16 to $8. They had a problem with lower than anticipated yields on a new 40 Gb light engine and had to redesign it and modify the manufacturing process. That was a onetime event that cost them 30 cents a share in Q1 despite record shipments. They saw a 30% increase in shipments of 100 Gb products.

Immediately after the earnings drop shares began to recover and reached $11.80 last week, which is decent resistance. With expectations for a return to profitability in Q2 I expect the $12 level to be broken and some short covering begin.

Earnings are August 4th. They did not warn for this quarter. We have a short window of about two weeks in this position.

With an AAOI trade at $12.00

Buy AAOI shares, initial stop loss $10.85.

No options recommended because of short duration trade.



NEW BEARISH Plays

No New Bearish Plays