Over the last one year period, shares of NeoPhotonics Corp (NYSE: .NPTN) have risen more than 42%, but it appears the stock gain is not done. According to the experts at Needham & Company, shares of NeoPhotonics have the potential to ascend to $18 over the next 12 months.
The analysts issued their refreshed view on NeoPhotonics Corp. (NYSE:NPTN) alongside a note that painted a rosy picture of the future of optoelectronics industry, where NeoPhotonics is a player. Specifically regarding NeoPhotonics, Needham analysts raised their price target on the shares of the company to $18 from $17. If you compare the new price target and the price at which shares of NeoPhotonics are currently trading, you see that the new target price implies a nearly 40% upside potential.
If the stock attains that target price, it would be a major gain for long-term shareholders in the company considering that the shares of NeoPhotonics are already up more than 42% over the last one year and up nearly 21% YTD.
Not only have Needham analysts raised their target price for NeoPhotonics Corp. (NYSE: NPTN), but they have also upgraded their rating on the stock. They now have a STRONG BUY rating on the stock of NeoPhotonics, up from a moderate BUY rating in the previous note.
What has changed at NeoPhotonics Corp. (NYSE: NPTN)?
If you are an inquisitive investor, you question on your mind now is: what is the underlying cause for the price target and ratings tweaks regarding NeoPhotonics? According to Needham, its analysis of the optoelectronics industry has made it believe that there is a major positive cycle in the offing for players in the industry.
The research firm pointed out that the proliferation of data centers, the rise of metropolitan networking and similar developments around the world will contribute enormous demand for fiber optic products. As much, a demand boom is awaiting NeoPhotonics Corp. (NYSE: NPTN) and its peers such as Lumentum Holdings Inc (NASDAQ:LITE), Oclaro, Inc. (NASDAQ:OCLR) and Infinera Corp. (NASDAQ:INFN).
With that, Needham sees NeoPhotonics’s revenue expanding at the rate of 25% annually and gross margin trending in the vicinity of 35% with operating margins exceeding Wall Street estimates.