Why Shares of Applied Optoelectronics Are Plummeting Today
Key Points
A B. Riley analyst downgraded Applied Optoelectronics stock and projects significant downside.
The company projects lower Q4 2025 revenue than what analysts expect.
With the company failing to make progress toward achieving a profit, investors may want to watch this tech stock from the sidelines.
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While the S&P 500 (SNPINDEX: ^GSPC) is marching higher to start the week, shares of Applied Optoelectronics (NASDAQ: AAOI) are racing in the other direction. Extending their slide from Friday, shares of the advanced optical devices manufacturer are on bears' radars after an analyst provided a dour outlook on the stock.
As of 11:32 a.m. ET, Applied Optoelectronics are down 14.8%.
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One analyst sees a sustained slide in the stock price
Espousing a pessimistic outlook on Applied Optoelectronics stock, Dave Kang, an analyst at B. Riley, downgraded his rating to sell from buy, maintaining his price target of $15. Based on the stock's closing price of $28.57 on Friday, Kang's outlook implies downside of more than 47%.
According to The Fly, Kang predicates his outlook on the belief that the company's revenue expectations are "lofty" and that it "faces a challenging road."
Applied Optoelectronics reported third-quarter 2025 financial results last week that included a less-than-inspiring outlook for Q4 2025. Whereas the consensus among analysts is that the company will report revenue of $144.5 million, the company provided Q4 2025 guidance of $125 million to $140 million. Plus, the company projects Q4 2025 net income of -$2.8 million to -$9 million.
Does the stock's pullback provide a potential buying opportunity?
With shares dipping lower today, investors eager to gain tech stock exposure may wonder if today's a good time to click the buy button, since Applied Optoelectronics stock has ripped more than 70% higher over the past six months. With the company currently reporting increasingly steeper losses over the past several years, investors may want to wait for Applied Optoelectronics to start progressing toward profitability before deciding to start a position.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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