My portfolio is highly concentrated, consisting of ENPH, MU, several oil companies and a few optical networkers. The number of optical networkers has shrunk down to basically one: Applied Optoelectronics (AAOI). I’m kindly disposed towards AAOI. I bought in rather blindly and saw the share price soar to $100 almost immediately. Whoa! Cool! Then the share price collapsed to the $30s. I was a buyer. Here’s the chart:
I was feeling pretty good about AAOI’s prospects (regardless of the technology war with China). Then the tariff talk got tough and all the players in the sector got slashed.
I bought more.
Why did I buy more? Because the market fear outgrew the actual risk. The short interest grew to more than 60% of the float! At this point, it would take almost two weeks of constant buying to wipe out all the short shares. I’m intrigued by all of this. I’ve seen stocks be heavily shorted before. But usually with good reason. However, if we review the financial stats for AAOI, we find a solid company:
I have no reason to believe that AAOI will not grow in the coming years. Heck, the enthusiasm for all the SaaS companies that will be utterly reliant on robust networking systems leads one to conclude the future is bright for the optical newtworkers.
I still need to add in data to todays date, but hopefully this might assist people who want to start looking at AAOI (a company I haven’t heard of). Putnid, if you notice anything wrong, please let me know.
Hopefully this will post properly…
cheers
Greg
Data is sourced from Quandl and IEX (for prices).
### Basic data (TMF1000)
* Revenue was 65.24m down (18.3%) from 79.86m from the previous quarter (96.22m same quarter last year)
* TTM Revenue was 351.34m up (14.6%) from 306.51m
* TTM Revenue per share (diluted) was 17.34 up (2.8%) from 16.87
* EPS diluted (prev quarter): was 0.11 down (60.7%) from 0.28
* Earnings (same quarter prev year): was 0.11 down (89.0%) from 1.00
* TTM eps was 2.77 down (1.4%) from 2.81
* Diluted share count was 19.99m up (1.5%) from 19.70m
* Cash and short-term investments was 83.30m down (0.8%) from 83.98m (prev quarter)
* Debt (prev quarter) was 65.15m up (31.5%) from 49.56m (prev quarter)
* Cash flow for quarter was -16.19m down (56.5%) from -10.34m
* Cash flow for TTM was -2.42m down (113.6%) from 17.77m
* Cash flow per share for TTM was $-0.12
* Gross margins was 0.40 down (1.7%) from 0.40
* CapExp was 12.12m down (42.1%) from 20.94m
### Last reported quarter ranges min, max [last]
* Trading range between Oct 01, 2017 - Dec 31, 2017 was 23.65 to 64.52 [25.06]
* Market cap between Oct 01, 2017 - Dec 31, 2017 was 461.19m to 1.251b [488.69m]
* PE range (Oct 01, 2017 - Dec 31, 2017) was 8.13 to 22.17 [8.61]
* PS ratio range (Oct 01, 2017 - Dec 31, 2017) was 1.35 to 3.67 [1.43]
* Free cash flow (TTM) yield range (Oct 01, 2017 - Dec 31, 2017) was -0.19 to -0.53 [-0.50]
* EV/Sales between Oct 01, 2017 - Dec 31, 2017 was 1.26 to 3.46 [1.34]
### Most recent quarter ranges min, max [last]
(uses more recent price data with last reported results)
* Trading range between Apr 01, 2018 - Jun 30, 2018 was 24.0 to 47.04 [44.9]
* Market cap between Apr 01, 2018 - Jun 30, 2018 was 479.73m to 940.26m [875.58m]
* PE range (Apr 01, 2018 - Jun 30, 2018) was 8.25 to 16.16 [15.43]
* PS ratio range (Apr 01, 2018 - Jun 30, 2018) was 1.37 to 2.68 [2.55]
* Free cash flow (TTM) yield range (Apr 01, 2018 - Jun 30, 2018) was -0.26 to -0.51 [-0.28]
* EV/Sales between Apr 01, 2018 - Jun 30, 2018 was 1.31 to 2.62 [2.50]
### Revenue
| Quarter | Revenue | TTM | 𝝳 (q-1) | 𝝳 (YoY) |
|:----------|:----------|:--------|:----------|:----------|
| 2013Q1 | 14.32m | | | |
| 2013Q2 | 19.60m | | 37% | |
| 2013Q3 | 20.77m | | 6% | |
| 2013Q4 | 23.74m | 78.42m | 14% | |
| 2014Q1 | 24.86m | 88.97m | 5% | 74% |
| 2014Q2 | 32.65m | 102.02m | 31% | 67% |
| 2014Q3 | 36.55m | 117.80m | 12% | 76% |
| 2014Q4 | 36.39m | 130.45m | -0% | 53% |
| 2015Q1 | 30.23m | 135.82m | -17% | 22% |
| 2015Q2 | 49.63m | 152.81m | 64% | 52% |
| 2015Q3 | 57.09m | 173.34m | 15% | 56% |
| 2015Q4 | 52.95m | 189.90m | -7% | 46% |
| 2016Q1 | 50.42m | 210.09m | -5% | 67% |
| 2016Q2 | 55.25m | 215.71m | 10% | 11% |
| 2016Q3 | 70.14m | 228.76m | 27% | 23% |
| 2016Q4 | 84.90m | 260.71m | 21% | 60% |
| 2017Q1 | 96.22m | 306.51m | 13% | 91% |
| 2017Q2 | 117.37m | 368.63m | 22% | 112% |
| 2017Q3 | 88.88m | 387.37m | -24% | 27% |
| 2017Q4 | 79.86m | 382.33m | -10% | -6% |
| 2018Q1 | 65.24m | 351.34m | -18% | -32% |
### Margins
| | Quarter | Gross margin | ebitdamargin | netmargin |
|---:|:----------|:---------------|:---------------|:------------|
| 0 | 2016Q2 | 31% | 8% | 1% |
| 1 | 2016Q3 | 33% | 15% | 25% |
| 2 | 2016Q4 | 38% | 24% | 17% |
| 3 | 2017Q1 | 43% | 29% | 21% |
| 4 | 2017Q2 | 45% | 33% | 25% |
| 5 | 2017Q3 | 44% | 26% | 22% |
| 6 | 2017Q4 | 40% | 20% | 7% |
| 7 | 2018Q1 | 40% | 12% | 3% |
### Free cash flow
| Quarter | FCF |
|:----------|:--------|
| 2016Q2 | -3.18m |
| 2016Q3 | 1.74m |
| 2016Q4 | 18.36m |
| 2017Q1 | 853k |
| 2017Q2 | 18.68m |
| 2017Q3 | -10.76m |
| 2017Q4 | 5.84m |
| 2018Q1 | -16.19m |
### Capital structure
| | cash | Investments | Cash and investments | Working Capital | Debt | Debt to Equity | Interest |
|:-------|:-------|:--------------|:-----------------------|:------------------|:-------|-----------------:|:-----------|
| 2016Q2 | 47.22m | 47k | 47.27m | 75.56m | 87.30m | 0.52 | 450k |
| 2016Q3 | 61.04m | 47k | 61.09m | 92.11m | 95.52m | 0.51 | 462k |
| 2016Q4 | 51.96m | 44k | 52.01m | 97.58m | 43.13m | 0.19 | 404k |
| 2017Q1 | 60.53m | 42k | 60.58m | 126.63m | 28.55m | 0.1 | 299k |
| 2017Q2 | 75.88m | 42k | 75.92m | 141.84m | 27.37m | 0.09 | 245k |
| 2017Q3 | 72.00m | 36k | 72.04m | 153.18m | 41.01m | 0.13 | 248k |
| 2017Q4 | 83.95m | 36k | 83.98m | 158.99m | 49.56m | 0.15 | 66k |
| 2018Q1 | 83.30m | 0.00 | 83.30m | 171.97m | 65.15m | 0.19 | 71k |
### Expenses
| Quarter | R and D | rndTTM | Change (q-1) | Change (YoY) | Sales, General, Admin | Change (q-1) | Change (YoY) |
|:----------|:----------|:-------|:---------------|:---------------|:------------------------|:---------------|:---------------|
| 2016Q2 | 7.81m | | | | 7.52m | | |
| 2016Q3 | 8.36m | | 7% | | 8.04m | 7% | |
| 2016Q4 | 7.21m | | -14% | | 9.19m | 14% | |
| 2017Q1 | 7.43m | 30.82m | 3% | | 9.72m | 6% | |
| 2017Q2 | 8.07m | 31.07m | 9% | 3% | 10.94m | 13% | 46% |
| 2017Q3 | 9.19m | 31.90m | 14% | 10% | 12.13m | 11% | 51% |
| 2017Q4 | 10.67m | 35.37m | 16% | 48% | 11.16m | -8% | 22% |
| 2018Q1 | 11.74m | 39.67m | 10% | 58% | 11.93m | 7% | 23% |
### DCF
CAGR
OpMar 0.20 0.25 0.30 0.35
0.10 18.6128 16.6968 14.2236 11.0654
0.15 45.1502 51.6163 59.8026 70.1005
I was in this stock at the time. AAOI was heavily dependent on Amazon as a customer (something like 60% of their sales). In fact, they had set up a warehousing operation from which Amazon could just help itself to inventory as needed and AAOI would then bill them. Two weeks before the ER that caused the drop, AAOI pre-announced very good numbers for the quarter then ending that supported its skyrocketing share price, but said nothing about next quarter’s guidance. Then as part of the ER/CC, a mere two weeks later, they announced that something had happened to the Amazon relationship – Amazon had mysteriously stopped or greatly reduced its inventory pulls and forward guidance would be greatly diminished. AAOI was unable to explain exactly what was going on with its dominant customer. Only in response to an analyst’s question did AAOI suggest that they had just become aware of this turn of events with Amazon in the two week period between the pre-announcement and the ER/CC. The CFO’s response lacked credibility in my view – he paused and was very hesitant in responding to the analyst. AAOI management lost all credibility. I sold out and haven’t looked back.
