Personal Finance

Here's Why Applied Optoelectronics Stock Fell 14.4% Last Month

A bundle of fiber-optic networking cables against a backdrop of lightning bolts and dark clouds.

What happened

Shares of Applied Optoelectronics (NASDAQ: AAOI) fell 14.4% lower in July of 2018, according to data from S&P Global Market Intelligence . The bulk of that drop occurred on July 18 following a negative research note from analyst firm B. Riley FBR.

So what

The firm said that this maker of fiber-optic networking components would lose more business than most of its rivals if and when the proposed tariffs on Chinese goods take effect. The company's factories are mainly in China, but its largest customers are American technology powerhouses Facebook and Amazon.com .

If Trump's tariff-based trade war with China goes any further, Applied Optoelectronics could lose a large portion of its revenues to competitors without this cumbersome economic baggage. Amazon and Facebook simply would have to source their transceivers from another company with factories closer to home.

A bundle of fiber-optic networking cables against a backdrop of lightning bolts and dark clouds.

Image source: Getty Images.

Now what

This is just another example of American businesseslosing ground due to Trump's tariffs. Applied Optoelectronics could try to work around the problem by leasing new manufacturing space outside of China or by chasing new clients in Europe and China to replace the lost business from fellow Americans, but neither one of these moves would be easy or particularly quick.

This company is clearly hoping that China and Washington will put their trade-policy differences aside before September, when the tariffs on Chinese goods are set to kick in.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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