Here's how I model $Applied Optoelectronics(AAOI)$ post the $600M ATM offering AH on a Friday...:
1. Revenue: Still fair to assume $5.6B in FY28 revenue (probably slightly conservative excluding ELSFP contribution).
I've been over these numbers a lot.
2. Margins: 22% non-GAAP net margins is a solid base case for 2028.
At $5.6B revenue scale, we should see operating leverage expansion.
We see $Lumentum(LITE)$ guiding towards 36%, Innolight ~31%, and Eoptolink ~37%.
22% is also currently in line with analyst estimates (who have so far been conservative on the $Applied Optoelectronics(AAOI)$ numbers but best to take a more conservative approach here).
3. Dilution: Current baseline is 84.6M
If full $600M is used here's the likely share count looking forward:
-> $125 = 4.7 - 4.8 million shares
-> $112 (after hours) = 5.25 - 5.4 million shares
Likely looking to be upwards of 90M shares in Q3 which is (so far) in line with Q3 guidance which I calculate to be ~92.8 million shares.
Looking into 2027-2028 management will be using more of a mix of:
-> Existing cash
-> Operating cash flow
-> Additional ATMs
-> Debt
2027 will likely be normal equity compensation + ATMs + cash. I anticipate we close 2027 ~105 million shares.
By 2028 most of the major dilution phase should be largely complete if mid-2027 targets are met.
2028 estimate =110 - 114 million shares.
4. Share price:
$5.6B * 22% -> $1.23B
$1.23B / 110 million shares -> 11.18x
30x EPS multiple -> $336 (200% gain)
40x EPS multiple (current $Lumentum(LITE)$ multiple) -> $448 (300% gain)
I know this ATM offering isn't bullish...but I don't know what people expected?
Management have been clear from the offset that equity raises were in the pipeline.
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