Applied Optoelectronics collapses after Q3 view, peers dragged lower

Shares optical equipment makers are trading lower in the after-hours after peer Applied Optoelectronics (AAOI) reported Q3 preliminary results that fell short of estimates. The maker of fiber-optic networking products dramatically lowered both its profit and revenue view for the quarter. The company now anticipates Q3 earnings per share of 91c-96c, down from its prior view of $1.30-$1.43. Revenue is expected to be $88M-$89M, lower than prior expectations of $107M-$115M. Analysts were expecting EPS of $1.31 on revenue of $111.58M for Q3. MANAGEMENT COMMENTARY: "Our preliminary results for the third quarter fell short of prior estimates and were negatively impacted by lower than expected sales to one of our large datacenter customers. Despite this shortfall, we maintained a strong gross margin profile in the quarter, and continued to experience solid demand with our other top datacenter customers," said Dr. Thompson Lin, Applied Optoelectronics founder, president, and CEO. "Although we are disappointed with these preliminary results, we continue to feel good about our leadership position in advanced optics and remain optimistic based on the customer traction we are seeing with our 100G products, especially our 100G CWDM transceivers." RECENT ANALYST VIEWS: On October 3, Craig-Hallum analyst Richard Shannon lowered his price target for Applied Optoelectronics to $80 from $95 on 40G transition acceleration and Intel (INTC) competitive threat. Nonetheless, the analyst says 100G+ remains robust, and Applied Optoelectronics' cost structure enables it to compete effectively. He reiterated a Buy rating on Applied Optoelectronics' shares at the time. Just a day before, on October 2, BWS Financial analyst Hamed Khorsand said he believed Applied Optoelectronics sales to Amazon (AMZN) have softened even more as the company moves away from 40G. He also thinks Intel's start of shipments of competing CWDM4 transceivers poses a threat to 100G revenue Applied has been generating from Facebook (FB). Khorsand kept his Sell rating on Applied Optoelectronics shares. PRICE ACTION: Shares of Applied Optoelectronics are down more than 18% to $48.10 per share in after-hours trading. OPTICAL PEERS LOWER: Shares of other companies in the space are all lower in post-market action, with Lumentum (LITE) down 2% to $57.80 per share, Finisar (FNSR) lower by 1.5% to $21.96 per share, and Oclaro (OCLR) falling 2.2% to $8.42 per share.