Could Acacia Communications (ACIA – Free Report) , the hottest IPO of 2016, still offer significant upside in 2017?

Many investment banks believe so. And I think the odds are pretty good too. That’s why I’m accumulating shares of Acacia over 45% off of its all-time highs above $125.

This maker of optical interconnect products for cloud infrastructure operators and content and communication service providers — think customers like Cisco (CSCO- Free Report) , Facebook (FB – Free Report) , Amazon (AMZN – Free Report) , Verizon (VZ –Free Report) and Germany’s ADVA — delivered its second earnings report as a public company in early November and the analysts welcomed the outlook.

The consensus for 2017 EPS shot up over 22% from $2.34 to $2.87, making it a Zacks #1 Rank Strong Buy again.

For a newly public company like this, the analysts will be slow to raise expectations too high until they get to know management and the company’s execution history. Since 2016 saw nearly 100% sales growth for Acacia, many doubt this can be repeated and so the consensus projection right now is for 33% revenue growth.

But at forward EPS of $2.87, the stock is trading at under 25X. For 33% top line growth, that’s growth at a very reasonable price.

And my sense is that sales will grow faster because Acacia’s optical networking products will be in high demand as the cloud buildout demands more 100G speed. The 100 Gigabit Ethernet protocol is designed to deliver data at 100 gigabits per second.

Here’s a chart of Acacia’s rise to investing stardom since the May IPO around $30 and the subsequent 62% fall back to reality…

The Acacia Opportunity

The stock has pulled back quite a bit, but the growth story is still intact. Let’s look at five “technical” facts first as they tell their own story of what the institutions think of the fundamentals:

1. Stock down over 25% since secondary of 4.5 million shares that was priced at $100 — when it was trading $90! That was BOLD!