Please ensure Javascript is enabled for purposes of website accessibility

Why NeoPhotonics Stock Is Down 11% Today

By Anders Bylund – Sep 18, 2019 at 2:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A negative analyst note reminded investors of an uncomfortable fact.

What happened

Shares of NeoPhotonics (NPTN) fell as much as 14.3% on Wednesday morning, hamstrung by an analyst downgrade. By 2:45 p.m. EDT, the maker of optoelectronic components and modules used in high-speed networking equipment had recovered somewhat to an 11.4% drop.

So what

B. Riley analyst David Kang downgraded NeoPhotonics from buy to neutral, setting his price target at $6.50 per share. Kang cited an uncomfortably high valuation and business uncertainty regarding the ban on doing business with China-based customer Huawei. The stock now trades at 66 times forward earnings.

A bundle of fiber-optic network fibers, lit up in white against a black backdrop.

Image source: Getty Images.

Now what

The same analyst firm has a history of moving NeoPhotonics' share prices both up and down. Huawei has been NeoPhotonics' largest customer for years. In 2018, the company accounted for 46% of NeoPhotonics' total sales.

The longer the U.S. government blocks American companies from selling components to this giant of both mobile devices and telecom equipment, the deeper the wounds will run in NeoPhotonics' long-term business prospects. It's no surprise to see investors taking a step back on this chilling reminder from B. Riley.

Anders Bylund owns shares of NeoPhotonics. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NeoPhotonics Corporation Stock Quote
NeoPhotonics Corporation
NPTN

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.