Guys we need to talk about
$AAOI...
$AAOI is one of the most controversial stocks in the world and I enjoy the disagreement.
Pretty cool that's it up 3x since I went long with many thousands of investors riding it with me up some portion of that gain on
@joinautopilot.
But what's cooler is that I think it's still asymmetrical here.
So let's break it down and figure out where we're at $170/share today.
Management argues they can get to $471M in monthly transceiver revenue by Q2 2027.
If you're new to photonics, this is because transceivers are one of the hottest commodities in data centers right now (they translate electricity to light) and 3 hyperscalers are working with
$AAOI on this.
At management's 40% gross margin target, that's ~$5.6B in annualized revenue. Run past opex, interest, tax, dilution, we might land around $14-15 in EPS on that run rate.
That's a 2028 number though because 2027 is the ramp mid year, so let's call it bull case $9 of EPS in 2027.
So at $170/share right now, on these calcs, you're paying 19x 2027 earnings, falling dramatically to 12x for 2028.
Don't trust management? Fair. Haircut both the revenue and the margin target by 30%, let's say we get to $4B at a 28% gross margin instead of $5.6B at 40%.
You still land near ~$6 in EPS, just over the analyst mean estimate for 2027E. That's 28x at $170, still WAY cheaper than
$LITE and
$COHR trade right now.
$LITE is at a 50x NTM forward PE per Fiscal AI.
$COHR is at 47x NTM forward PE per Fiscal AI.
You're paying a fraction of the multiples of its peer group for a faster growing business because execution is still a huge question mark.
If you are an asymmetric trader like me, you might have a large concentrated position in
$AAOI for these reasons.
I do believe the stock at $170 is still a solid entry point and I began loading again heavily in the 160's.
$AAOI Up 13% AH
It is the largest position in my photonics fund.
- Q4 revenue: $134.3M ( 34% YoY)
- Gross margin: 31.2% vs 28.7% last year
- $455.7M. That's double 2024's $249.4M.
- Q1 2026 guide is $150M–$165M. Margins holding.
Photonics is next.