DA Davidson analyst Mark Kelleher lowered his price target on Applied Optoelectronics (AAOI) to $55 following a miss on Q4 revenue and lower than expected Q1 guidance. The analyst attributes the miss to a sequential decline in gross margins due to reduced capacity utilization and price cuts, while also modeling a weaker 40GB/100GB demand in his price target going forward. Kelleher keeps his Buy rating on Applied Optoelectronics, thanks in part to an incremental positive of its recent supply agreement with Facebook (FB), with the revenue ramp from the contract expected in the second half of this year.

DA Davidson analyst Mark Kelleher writes that his recent meetings with the management of Applied Optoelectronics (AAOI) suggests that investors underappreciate the impact of its $125M deal with Facebook (FB). The analyst notes that the deal gives the company some added visibility for the second half of 2018 and is also a sign that Facebook acknowledges the possibility of a transceiver shortage by the end of the year. Kelleher keeps his Buy rating and $55 price target on Applied Optoelectronics.

Following a deep dive into the company's advertising business, Jefferies analyst Brent Thill raised his price target for Amazon.com (AMZN) shares to $1,850 from $1,750. The stock closed yesterday up $19.50 to $1,589.39. Amazon's ad segment should grow annually at 43% to $22B by 2022, Thill tells investors in a research note. Amazon is aggressively growing its advertising business, but not at the expense of Facebook (FB) and Google (GOOG, GOOGL), the analyst contends. He says Amazon's "billions of touch points with consumers and end of funnel sales conversion are an advertiser's dream for targeting and attribution." Thill thinks the "right pieces are in place" for Amazon to get to $1 trillion in market capitalization over time. He keeps a Buy rating on Amazon shares.

Morgan Stanley analyst Adam Jonas noted that auto companies' valuations have compressed to extremely low levels, but he believes that a move from a vehicle ownership model to a transportation subscriber model could expand the revenue opportunities for the potential "tollkeepers" for the monetization of content and data by "nearly an order of magnitude." Looking at U.S. technology leaders Facebook (FB) and Apple (AAPL), which are both valued on their installed base/subscriber models, can "offer valuable clues" regarding the opportunity for General Motors (GM) and other auto OEMs, said Jonas. Viewing the OEMs though the lens of a subscription model, which should be less cyclical and potentially less capital intensive over time than the current auto model, is relevant to analyzing auto stocks, according to Jonas, who adds that it is still too early to call a winner or loser in "Auto 2.0." Other publicly traded legacy automakers include Fiat Chrysler (FCAU), Ford (F), Honda (HMC), Nissan (NSANY), Toyota (TM), Volkswagen (VLKAY) and Daimler (DDAIF).