Coherent (COHR): Assessing Valuation After Cautious Guidance and Mixed Results Draw Market Scrutiny

Coherent (NYSE:COHR) has found itself in the investor spotlight after releasing its latest earnings report, which showed a mixed bag. The company posted stronger sales for both the quarter and full year, but its revenue outlook for the upcoming quarter came in lighter than many expected. With a widening quarterly net loss and management’s cautious guidance, it is not surprising to see the market react with a bit more skepticism in the short term. This is particularly true as investors had been watching for proof that Coherent’s AI and datacenter bets were already moving the needle.

This comes after a volatile few months for Coherent’s stock price. The shares are down over 10% in the past month but are up 13% over the past year. Last year’s pivot toward AI and high-speed datacenter networking generated buzz, with revenues for next-generation optical products finally starting to show up on the books. Momentum had been building earlier this year with optimism tied to AI-fueled demand, but recent earnings and forward guidance have slowed that narrative and brought more caution.

After a year of upward movement offset by a setback this month, some investors are weighing whether Coherent’s new valuation is tempting or if the current price already reflects all of its future growth potential.

Most Popular Narrative: 19.3% Undervalued

According to community narrative, Coherent is considered notably undervalued based on future prospects and detailed analyst projections.

The ongoing expansion of AI datacenter infrastructure and high-performance computing is propelling structural growth in demand for advanced optical transceivers (800G, 1.6T, and beyond), optical circuit switches, and related photonics components. This is fueling robust sequential order growth and sustained revenue momentum in Coherent's datacom and communications business.

Curious about the optimistic outlook driving this bold undervaluation call? The key factor in this narrative comes from ambitious forecasts for top-line growth, margin improvements, and a future profit multiple that rivals some industry giants. Want to see exactly what’s behind those high expectations? Prepare to uncover the unknowns that might reshape what you believe is possible for Coherent.

Result: Fair Value of $111.44 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slower industrial demand or lower-than-expected returns from manufacturing investments could quickly undermine the positive outlook for Coherent’s long-term growth.

Find out about the key risks to this Coherent narrative.

Another View: Discounted Cash Flow Perspective

Not everyone relies on analyst targets when considering value. The SWS DCF model uses an entirely different approach. In this case, it also points to Coherent being undervalued. Could these different models be identifying the same opportunity, or is there something the market still questions?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Coherent for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Coherent Narrative

If you have a different take or want to dig into the details yourself, you can quickly craft your own viewpoint based on the data, or simply do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Coherent.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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