Last Update 02 Feb 26

Fair value Increased 13%

LASR: Q4 Outlook Will Weigh Capacity Expansion Against Execution Risks

Analysts have lifted their price target for nLIGHT to around $47.43 from about $41.86. They point to updated assumptions around revenue growth, profit margins, discount rates, and future P/E, which are reflected in recent target increases cited in Street research.

Analyst Commentary

Recent Street research on nLIGHT has centered on refreshed assumptions for revenue growth, profitability, and valuation multiples, which underpin the updated price targets around US$47.43. These views provide a sense of what bullish and cautious analysts are focusing on as they update their models.

Bullish Takeaways

Bullish analysts link their higher price targets to revised revenue assumptions, suggesting they see room for the company to support a higher valuation if those top line expectations are met.
They highlight improved profit margin assumptions as a key input, indicating confidence that the business can scale in a way that supports healthier earnings power over time.
Adjustments to future P/E assumptions are a major driver of the new targets. Bullish analysts are effectively assigning a richer multiple to the stock based on their view of its long term earnings potential.
Refined discount rate inputs in their models suggest these analysts are comfortable with the company’s risk profile relative to the potential cash flows they are forecasting.

Bearish Takeaways

More cautious analysts focus on the same revenue and margin assumptions but highlight that the investment case relies on those targets being executed consistently, which they view as a key risk for the valuation.
They question how sustainable the assumed profit margins might be, especially if cost pressures or competitive factors weigh on earnings, which would put pressure on the higher price targets.
Some note that the higher future P/E assumptions leave less room for error, since any shortfall in growth or profitability could lead to a compression in the multiple they are using today.
Cautious analysts also flag that the valuation is sensitive to changes in discount rates, meaning shifts in perceived risk or market conditions could reduce the present value of the cash flows in their models.

What’s in the News

nLIGHT added 50,000 square feet of leased manufacturing and office space in Longmont, Colorado, which more than doubles its current capacity and is intended to support beam combined high energy laser production for the U.S. Department of War and other U.S. agencies (Key Developments).
The company issued earnings guidance for the fourth quarter of 2025, with expected revenue in a range of US$78 million to US$80 million, above its previously announced range of US$72 million to US$78 million, and with Laser Products revenue expected at US$54 million to US$55 million and Advanced Development revenue at about US$24 million to US$25 million, primarily tied to Aerospace & Defense demand (Key Developments).
nLIGHT also provided earlier earnings guidance for the same quarter, indicating expected revenue of US$72 million to US$78 million, with Products revenue of about US$55 million and Advanced Development revenue of about US$20 million, which outlines how management described its revenue mix between core products and development work (Key Developments).

Valuation Changes

Fair Value: increased from about US$41.86 to around US$47.43, a change of roughly US$5.57 per share.
Discount Rate: edged slightly lower from about 8.45% to about 8.39%, indicating a small adjustment in the risk input used in the models.
Revenue Growth: moved modestly higher from about 15.48% to about 15.81%, reflecting a slightly stronger revenue outlook in the updated assumptions.
Net Profit Margin: shifted from about 8.75% to about 8.06%, indicating a somewhat more conservative view on profitability in the new model.
Future P/E: raised from about 97.49x to about 118.71x, pointing to a higher multiple being applied to projected earnings.

Expanding defense programs and adoption in high-growth manufacturing segments drive strong, diversified revenue and reduce reliance on any single customer or market.
Operational improvements and a shift toward higher-margin verticals enhance profitability, earnings stability, and free cash flow potential.
Heavy dependence on defense revenue and underperforming commercial sales heighten exposure to government budget shifts, execution risks, and potential future margin pressures.

Catalysts

About nLIGHT

Designs, develops, manufactures, and sells semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications.What are the underlying business or industry changes driving this perspective?

The rapid growth and expanding pipeline in aerospace and defense, particularly around high-power laser solutions (e.g., HELSI-2 program, DE M-SHORAD, Golden Dome initiative, and increased directed energy orders internationally), positions nLIGHT to benefit from rising global defense spending and modernization, supporting strong multi-year revenue growth.
Increasing adoption of advanced laser technologies for automation, smart manufacturing, and additive manufacturing (especially in high-growth EV, clean energy, and microfabrication segments) underpins long-term demand for nLIGHT's differentiated products, providing a runway for sustained top-line expansion.
Successful transition of amplifier products from R&D to scalable manufacturing demonstrates operational leverage and positions nLIGHT to improve gross margins as production volumes rise and fixed costs are absorbed more efficiently.
Broadened geographic reach with new international defense customers, combined with a pivot to higher-margin verticals (e.g., additive manufacturing, laser sensing), diversifies revenue streams and reduces customer concentration risk, bolstering earnings stability and growth.
Recent improvements in gross margin, disciplined operating expense management, and better working capital efficiency indicate potential for enhanced earnings and free cash flow as revenue mix shifts further toward defense and advanced manufacturing applications.

nLIGHT Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming nLIGHT's revenue will grow by 12.7% annually over the next 3 years.
Analysts are not forecasting that nLIGHT will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate nLIGHT's profit margin will increase from -21.7% to the average US Electronic industry of 9.0% in 3 years.
If nLIGHT's profit margin were to converge on the industry average, you could expect earnings to reach $28.1 million (and earnings per share of $0.52) by about September 2028, up from $-47.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 68.3x on those 2028 earnings, up from -30.5x today. This future PE is greater than the current PE for the US Electronic industry at 23.1x.
Analysts expect the number of shares outstanding to grow by 3.04% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.12%, as per the Simply Wall St company report.

nLIGHT Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy reliance on aerospace and defense (A&D) revenue-now 66% of total sales and growing-significantly increases nLIGHT's exposure to shifts in U.S. government priority or budget allocations; a change in defense spending or delays/cancellations in large programs like HELSI-2 could have outsized negative impacts on revenue and earnings stability.
The commercial/industrial segment, including microfabrication, continues to underperform year-over-year (down 9%), and management expects only limited or unsustained demand improvement; reduced diversification and persistent weakness here could increase earnings volatility and limit long-term top-line growth.
The transition of key amplifier products from R&D to mass manufacturing carries execution risks; any production setbacks, quality issues, or delays in scaling could disrupt delivery into critical programs and erode gross margins during this scaling phase.
Nonspecific and early-stage international wins in directed energy-while promising-remain subject to strong execution risk, regulatory uncertainties, and geopolitical tensions; difficulty converting pipeline opportunities abroad could cap international revenue growth and margin improvement.
Recent improvements in gross margin benefited from a favorable business mix and above-average factory absorption, both of which management cautioned may not persist; as development gross margins normalize (~8%) and the product mix shifts, there may be downward pressure on overall gross margin, potentially dampening future net margins and operating leverage.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $28.083 for nLIGHT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $32.0, and the most bearish reporting a price target of just $25.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $310.5 million, earnings will come to $28.1 million, and it would be trading on a PE ratio of 68.3x, assuming you use a discount rate of 8.1%.
Given the current share price of $28.7, the analyst price target of $28.08 is 2.2% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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