Is Applied Optoelectronics (AAOI) a small cap stock with great upside potential?
Recently I published the list There are 10 small cap stocks. In this article, we will introduce Applied Optoelectronics, Inc. We’ll see where (NASDAQ: AAOI) counters other small capstocks with great opposite potential.
In an age where everyone is chasing the high cap powerhouse, knowing the right stocks to invest in the right time and the right price is extremely important. In this race for the Wall Street giants you have to slow down and ask if the stock is really worth it. Or is it set to produce the same returns as high-growth small-caps? Francis Gannon, co-Chief Investment Officer at Royce Investment Partners, said:
“Smallcaps are “forgotten” groups that present favorable opportunities for investors seeking diversification amid market uncertainty. ”
Small-cap stocks have market capitalizations ranging from $300 million to $2 billion. Although generally more unstable and dangerous, history shows that small caps often outweigh large caps. During the 1990s high-tech bubble, everyone was a favorite of everyone until the bubble burst in March 2000. Generally, stock performance is not entirely dependent on whether the stock is large or small, but more dependent on where the macro and microenvironments employ the business. However, small caps are usually more undervalued as they are far from the eyes of analysts, allowing them to provide solid returns on their investments.
Small caps are highly valued by analysts because of the high growth potential for such inventory. The business itself is in the early stages of growth, which means there is more room for inventory boom. Volatility is another reason to hold these stocks. There is an increasing possibility of short-term trading and price fluctuations available to investors. Furthermore, many of such stocks operate in professional or niche markets, allowing analysts to take advantage of interesting and unique business models, and if successful they can return very much. The fact that small caps are a common target for mergers and acquisitions is another reason to believe in these stocks. Analysts track these stocks in anticipation of shopping. This often leads to a stock price premium.
A research report by John Hancock Investment Management on understanding the performance of small-cap stocks shows that small-cap stocks historically have a higher average return rate than large-cap stocks. Small caps work well in a diverse portfolio, and thus behave differently than large caps. This study investigated the existence of US size premiums and highlighted the historical performance of FAMA/France’s US large and small cap portfolio. The findings show that small caps have outperformed large caps since the 1920s. Another 2020 Invesco study found that the small cap has surpassed the big cap since the last four recessions.
To determine which small caps are suitable for you, it is appropriate to closely monitor not only the stock itself but also the peers, as it provides a larger image. Key factors for your choices include liquidity position, sensitivity to market fluctuations, financial stability, and connections with AI. The stocks we choose are one of those that offers a high potential for a rise across a variety of industries, including finance, food and mining.
We used Finviz and the Stock Analysis screener to select 10 shares with a market capitalization of between $300 million and $2 billion. The yearly price target was extracted from Yahoo Finance to calculate the upward potential based on the stock’s price as of March 28, 2025. These companies are listed according to their potential for rise.
At Insider Monkey, I’m obsessed with hedge funds. Why are hedge funds interested in the stocks they accumulate? The reason is simple. Our research shows that mimic the top stock picks of the best hedge funds can outperform the market. Quarterly Newsletter’s strategy was to select 14 small and large caps per quarter, returning 373.4% since May 2014, surpassing the benchmark by 218 percentage points (For more information, please see here).
Applied Optoelectronics, Inc. Is (AAOI) a small cap stock with great potential for rising?
Engineers observing complex fiber optic networking setups in the laboratory.
Possibility of upwards: 133%
Market Cap: $823.092 million
Applied Optoelectronics, Inc. (NASDAQ: AAOI) is a Texas-based provider of fiber optic networking products. This vertically integrated company is involved in the design and development of optical communication products including advanced optical devices, laser transmitters, cable television, point-to-point communication, wireless, and HFC networking. Founded in 1997, the company is dedicated to transforming communications by connecting the world more efficiently.
Recently, Applied Optoelectronics, Inc. (NASDAQ: AAOI) created a headline in a transaction with Amazon. The company, which is attractive to the outside world, has yet to disclose its underlying terms. But that clearly implies one thing. Aaoi is all involved in big games.
Applied Optoelectronics, Inc. (NASDAQ: AAOI) Q4 2024 revenues showed improved performance, providing revenue and total margins within forecast ranges. Much of the revenue growth was attributed to the expansion of the 400G products of the major powers, the CATV segment, and production capacity. Management also noted that they receive large orders for quantum bandwidth networking products from leading North America-based cable operators. Revenues began this month and will be reflected in future financial results.
Applecelectronics, Inc. is required to produce several products in the country to meet strict data center requirements. (NASDAQ: AAOI) is now opening a new production facility in Texas. The company also plans to expand in Taiwan through another production facility due to its robust global presence.
The demand for AAOI’s cloud computing infrastructure and data centers is a strong case. And from what we can expect, the demand could be from Tech Titan Amazon itself. The yearly price target is $38.20, and the company’s chance of a 133% rise is evidence of our bull’s attitude. It is one of the best stocks with the greatest advantages.
Overall, and 4th place On a list of small cap stocks with huge ascent potential. We acknowledge the possibility of AAOI, but our belief lies in the belief that AI stocks offer higher returns and hold a greater promise to do so within a shorter time frame. There have been AI stocks that have risen since the beginning of 2025, and the popular AI stocks have lost around 25%. If you’re looking for AI stocks that are more promising than AAOI, but are trading below 5 times the revenue, check out our report on this Cheapest AI stocks.
