Shares of NeoPhotonics (NPTN) - Get NeoPhotonics Corporation Report plunged nearly 25% on Friday after the optical communications equipment maker received a downgrade from an analyst at MKM Partners, who cited increased uncertainty relative to the company's largest customer, Huawei.
NeoPhotonics stock was down 24.67% to $3.42 on the Nasdaq Stock Market after MKM Partners analyst Michael Genovese cut his rating on the company to neutral from buy and slashed his price target in half - to $4.50 from $9 - noting that Huawei accounted for almost half of NeoPhotonics' sales in 2018.
Genovese said he "holds out hope" that there is a 50% probability that the ban is walked back as part of a trade agreement, which would then turn the recent selloff into a buying opportunity.
The company is "levered to all the strongest customers in the industry," he wrote in a previous research note to clients published last month, noting at that time that while Huawei makes up about 46% of NeoPhotonics' revenue, it is still unlikely Huawei will be banned from buying U.S. components.
For now, that does not appear to be the case. The U.S. Commerce Department on Thursday added Huawei and dozens of its affiliates to an "Entity List" that would greatly restrict its ability to buy components from U.S. companies.
NeoPhotonics' stock has tumbled more than 40% over the past three months.
NeoPhotonics makes so-called hybrid photonic integrated optoelectronic modules that help boost high-speed data transmission and efficient allocation of bandwidth over communications networks.