What happened

Applied Optoelectronics (NASDAQ:AAOI) had a volatile first half of 2018, according to data from S&P Global Market Intelligence. Share prices fell as much as 40% before bouncing back, and the maker of optoelectronic components for fiber-optic networking systems locked in an 18.7% year-to-date gain at the end of June.

So what

In early 2017, Applied Optoelectronics saw its largest customer -- Amazon.com -- rack up a huge stockpile of fiber module orders to support the expansion of its cloud computing data centers. The orders stopped coming mid-year as Amazon started to work through its massive oversupply, and Applied Optoelectronics took that shift right on the chin.

But it only took a couple of positive analyst reports to start turning things around in April, followed by an impressive investor conference at the end of May. Shares surged 13% higher in April with another 17% single-day lift in late May.

A bundle of lit fiber-optic wires against a black backdrop.

Image source: Getty Images.

Now what

Applied Optoelectronics may have posted an impressive return in early 2018, but the stock remains 44% below its 52-week highs. If the company can follow through on the promises management made at the investor conference, we should see a return to revenue growth and stronger earnings in the next few quarters.

Either way, it's clear that optical networking has a lot of growth catalysts coming up in the next couple of years. Buying Applied Optoelectronics at these sharp discounts to fairly recent highs could make sense.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.