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Analysts at B Riley said in a research note that they believe three “compelling catalysts” will drive margin expansion for the company, which remains one of the firm’s top AI plays. The firm’s bullish view was reinforced following its meetings with Applied Optoelectronics CFO Stefan Murry.
“In short, the company will have three significant growth drivers in 2025: (1) Microsoft’s (MSFT) AOCs (active optical cables), (2) 800G for AI clusters in datacenters, and (3) CATV’s upgrade cycle,” wrote the analysts at B Riley.
“We believe they will drive significant margin expansion, with GM/OM expected to be in the high 30s/12%–14% by 2025. We believe the margin expansion, backed by robust revenue growth, should drive multiple expansion,” they added.
The investment firm also commented that the recent ATM and the convertible notes offering have “significantly strengthened” the company’s balance sheet, which “has been its Achilles heel in the past.”
