Why Applied Optoelectronics Stock Is Soaring Today

Shares of Applied Optoelectronics (NASDAQ: AAOI) are soaring today, up 7% as of 12:51 p.m. ET. The move comes as the S&P 500 and Nasdaq Composite were relatively flat.

The company, which develops and manufactures fiber optic technology, announced that it has delivered an important shipment of its advanced transceivers.

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The first shipment of many

Applied Optoelectronics announced late Wednesday that it has completed its first "volume shipment of high-speed data center transceivers to a recently reengaged major hyperscale data center customer." The major shipment is expected to be the first of many with this unnamed data center operator and the first of its size for the company in several years.

Image source: Getty Images.

CEO Thompson Lin in a statement emphasized this, saying the shipment "represents a significant milestone on a journey to what we continue to expect to be significant business opportunities with this newly reengaged customer" adding that he "continue[s] to expect shipments to this customer and other customers to increase in line with our previous commentary of a second-half ramp." Investors were pleased to see the company begin delivering on this plan.

The stock isn't cheap

Despite the excitement surrounding this major shipment, I think the stock is overvalued at the moment. While its price-to-sales ratio (P/S) is well within reason, the company struggles to turn a profit. It is projected to operate in the black in this coming quarter, but its earnings will be fairly meager given its market capitalization. The company faces stiff competition from large players like Cisco and will continue to need to spend considerably on research and development to keep up.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems. The Motley Fool has a disclosure policy.