Are Buyers Returning to This Forgotten Corner of Tech?


Disclosure: This post is intended for educational purposes only and isn’t intended as a trade recommendation.

Most traders love technology stocks. Did you know that a long-forgotten group in the space is ripping higher this month?

We’re talking about fiber optics. Consider some of these gains in the first five sessions of August:

  • NeoPhotonics (NPTN) is up 30 percent. It’s pretty tiny at just $300 million in market cap. Earnings late Monday beat estimates, which explains the rally higher.
  • Coherent (COHR) has gained 19 percent. This company, much bigger at $4.6 billion, provides lasers for optical communications. COHR has moved higher despite appearing to miss estimates on July 31.
  • Acacia Communications (ACIA). The $1.5 billion provider of optical connectors issued strong revenue and guided above expectations on August 2. Management highlighted new customer wins in China and growing demand from India.
  • Lumentum (LITE): The $3.5 billion company rose 11 percent this month, rebounding from a decline the previous month.

There were also are some other items. The first is President Trump’s decision in July to let Chinese telecom ZTE purchase U.S. technology. It turns out one of the big items are fiber optics. Several companies and analysts have viewed this as a positive factor.

Secondly, Corning (GLW) ripped 11 percent on July 25, its biggest rally in at least three years. Weighing in at $26 billion, GLW is the largest and best known company in the industry. Why? “Strong market demand” and “optical Communications is now expected to grow by a high-teens percentage for the year versus prior guidance of 10 percent.” That’s what the company said.

Applied Optoelectronics (AAOI) is another tidbit. It was was valued at just $760 million yesterday, but forecast-beating results sent the shares up more than 10 percent after the closing bell. Management cited demand from data centers and Chinese customers.

In conclusion, there’s still more to learn about fiber optics. But it might be a good time to get started because things in the space seem to be moving.

Viavi (VIAV), with post-earnings bullish gaps.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.