Poet Technologies Rose Today Despite Pressures for AI Stocks -- Is It a Buy Right Now?
Key Points
Poet stock initially saw a big valuation pullback as the market reacted to Broadcom's and Ciena's latest quarterly report.
Poet's share price battled back and managed to post a modest gain today.
The stock has substantial upside potential, but it looks very risky.
- 10 stocks we like better than Poet Technologies ›
Poet Technologies (NASDAQ: POET) managed to post a modest gain on Thursday despite bearish trading for optics and networking technologies stocks. The company's share price closed out the day up roughly 0.6%.
Poet stock battled back from early sell-offs connected to the market's negative reaction to earnings reports from Broadcom and Ciena. The company's share price had been down as much as 10.6% early in the day's trading, but it bounced back as some investors reassessed the situation and treated the pullback as a buying opportunity.
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The market had a negative reaction to Broadcom and Ciena's quarterly reports
Broadcom published its latest quarterly report after the market closed yesterday, and Ciena published its quarterly results before the market opened this morning. While both companies posted sales and earnings that came in ahead of the average Wall Street estimates, both stocks saw dramatic pullbacks in today's trading. More strikingly, each company actually raised its full-year sales outlook.
Despite strong quarters, both companies got hit with big valuation contractions in today's trading. Broadcom ended the day down 12.6%, and Ciena was down 13.7%.
Is Poet stock a buy right now?
Despite trading down 25% from its 52-week high, Poet stock is still up roughly 144.5% year to date. The company now has a market capitalization of roughly $2.37 billion and is valued at approximately 235 times this year's expected sales.
While the company recently announced that it had secured a contract with Lumilens worth at least $50 million, the timeline for revenue recognition on the deal remains uncertain -- and it's possible that the figures used to calculate the company's forward price could actually significantly overestimate the business's sales for the year.
Additionally, the contract also provided Lumilens with warrants allowing it to buy shares of Poet at $8.50 per share -- a very favorable valuation. With the company's uncertain sales outlook and dilutive stock offerings in mind, I think investing in Poet carries a high degree of risk right now.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Ciena. The Motley Fool has a disclosure policy.
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