COHR: AI And Cloud Spending Will Mask Auto And China Risks

Analysts have modestly raised their price target on Coherent, lifting fair value by about $6 to approximately $175 per share, citing the company's recent earnings beat, strengthened AI and cloud capex positioning, and an improving growth outlook reflected in higher projected revenue growth and future valuation multiples.

Analyst Commentary

Bullish analysts remain constructive on Coherent's positioning, pointing to a series of price target increases that reflect greater confidence in the company’s execution, visibility on demand, and leverage to AI and cloud infrastructure spending.

Bullish Takeaways

• Multiple price target hikes, in several cases by wide margins, signal rising conviction that Coherent can sustain faster growth and support a higher valuation range over the next 12 to 18 months.
• The recent earnings beat and above-consensus near term outlook are seen as evidence that capacity expansions, particularly in key optical fabrication assets, are now translating into tangible revenue acceleration.
• Exposure to AI and cloud capex, especially in high speed optical connectivity, is viewed as a structural growth driver that could support premium multiples relative to more traditional telecom and networking suppliers.
• Positive channel checks, peer commentary, and internal self help initiatives are cited as underpinning a more durable margin improvement story, which could enhance free cash flow generation and balance sheet flexibility.

Bearish Takeaways

• Some cautious analysts are maintaining more neutral ratings despite higher targets, reflecting concerns that expectations for AI driven demand and capacity utilization may already be embedded in the share price.
• Macro and sector specific risks, including potential softness tied to Chinese electric vehicle production cuts and evolving tariff dynamics, could weigh on growth in auto exposed segments and cap near term upside.
• Within the broader telecom and networking ecosystem, Coherent is still compared against peers with higher margins, leaving less room for disappointment if networking and optical bottleneck relief proves slower than anticipated.
• Relative underperformance versus certain competitors year to date underscores worries that execution missteps or slower orders in any end market could quickly pressure valuation multiples after the recent rerating.

What's in the News

• Reached a major milestone in its next generation 300mm silicon carbide platform targeting higher thermal efficiency and energy savings in AI datacenter infrastructure, with additional applications in AR/VR and power electronics such as EVs and renewables (Key Developments).
• Launched the Axon FP femtosecond laser, a compact, fiber delivered source designed to simplify integration and lower costs for next generation life sciences, instrumentation, and metrology applications (Key Developments).
• Introduced upgraded Multi Rail optical transport platform technology, including a new Dynamic Gain Equalizer that doubles transmission bandwidth while shrinking footprint, aimed at hyperscale network operators (Key Developments).
• Announced the industry’s first QSFP28 Dual Laser 100G ZR module for single fiber, bidirectional access and aggregation networks, enabling 10x capacity upgrades on existing 10G infrastructure at lower power and cost per bit (Key Developments).
• Entered a multi year partnership with Eudia to build an AI native “Coherent Brain” legal platform that unifies contracts, workflows, and institutional knowledge across commercial, IP, litigation, and compliance functions (Key Developments).

Valuation Changes

• Fair Value: risen slightly, increasing from approximately $169 per share to about $175 per share.
• Discount Rate: fallen marginally, easing from about 8.80 percent to roughly 8.73 percent, modestly lowering the cost of capital assumptions.
• Revenue Growth: edged higher, with the projected long term growth rate rising from about 13.26 percent to roughly 13.33 percent.
• Net Profit Margin: slipped slightly, with the long term margin assumption moving from about 12.74 percent to around 12.68 percent.
• Future P/E: risen modestly, with the forward multiple increasing from roughly 31.7x to about 32.8x, implying a somewhat higher valuation framework.