Applied Optoelectronics Positive Pre-Announcement Makes Optics Component Sector Even Cheaper


Last night after the close of regular market trading, Applied Optoelectronics positively pre-announced results for the just completed March quarter.

Shares of the company are soaring this morning as a result, and are up over $5 and change per share, as of this writing, to $46.30.

The last couple of weeks, every talking head/guru/swami/pundit/darksider/kindly uncle has had nothing but negative things to say about the companies in the optical component sector, including the following rumors and innuendo:

"Chinese 100G and DCI build-out had come to a screeching halt."

"The President Trump and President Xi meeting would mean disaster for U.S. trade relations and would be the death knell for the fiber optics component sector, which does a lot of business with Chinese companies." Not only did that turn out to be false but even ridiculously so in hind sight. President Trump refused to call the Chinese "currency manipulators," but he also said that things went well enough at the meeting last weekend that he would be visiting China soon among other positive vibes.

Another reason that was popular in the last couple of weeks was the fact that, all of sudden, the darkside was chattering that the big DCI customers like Amazon, Google, Apple etc were all going to build their own data-centers and, therefore, business for the likes of Applied Optoelectronics and the rest of the players in the sector would suddenly go to zero. Think about that for a minute. Can the likes of Amazon et al suddenly become component manufacturers?  However insane that possibility, given the negative overall market environment we have been going through, with the darksiders pressing, and the sellsiders cowering under their desks, the shares in the sector were hammered hard the last couple of weeks.

So, what is buyable off the positive pre-announcement from Applied Optoelectronics?

Pretty much every company in the sector has been beaten down the last few weeks and would be a buy at present, however, investors and traders should bear in mind that there are a lot of traders/trapped longs who will bail on their holdings on almost every rise.

So don't expect a miracle overnight.

Words to the wise.

(Long aaoi, long and short options as well)

Follow me on twitter @jsomaney, find my other Forbes posts & articles from other platforms at where you can get my real-time opinion on the stock markets live daily.

I am the founder and managing partner of TSG Capital, a family office and technology hedge fund holding company. Previously, I worked on the sell-side as an Technology a...