Coherent collapses 20% on datacom concerns but analysts remain bullish
Aug. 14, 2025 10:16 AM ET
By: Brandon Evans, SA News Editor
Coherent (NYSE: COHR) shares plunged 20% during early market action on Thursday, following its latest financial results, as some investors might be concerned over the company's market share in its datacom offerings.
However, most financial firm analysts remain positive on the company and its long-term potential.
For example, Needham maintained its Buy rating and $120 price target on the stock.
"Notably, 1Q COHR revenue guidance of +15% y/y underwhelmed relative to peer Lumentum ( LITE), which is delivering 6-handle % Networking growth," said Needham analysts, led by Ryan Koontz, in a Thursday investor note. "We continue to see strong secular tailwinds benefiting the broad industry, and we modestly increase our F26 EPS estimates while decreasing F26 revenue estimates."
"Networking revenue increased 5% Q/Q to $945M," said B. Riley Securities analyst Dave Kang, in a note. "Within Networking, Datacom increased 3% Q/Q, down from +11% in F3Q. Although management attributed the deceleration to quarterly lumpiness, we believe there could be another factor, Nvidia ( NVDA). Fabrinet ( FN) reported in early May that demand from NVDA could be soft N-T due to a product transition. As a major supplier of 800G to NVDA, we believe COHR could be experiencing similar sluggish demand from NVDA."
B. Riley maintained its Neutral rating and increased its price target to $85 from $77.
Meanwhile, Stifel reiterated its Buy rating and increased its price target to $118 from $100.
"Management continues to target margin expansion via specific levers in cost reduction, volume expansion, and pricing improvement, reflected in COHR's aforementioned A&D divestment - a $400mn sale of its A&D business to Advent, with proceeds expected to yield a reduction in COHR's overall cost burden (via targeted interest expense reductions), per management," said Stifel analysts, led by Ruben Roy, in an investor note.
Coherent announced on Wednesday it's selling its Aerospace and Defense business to Advent for $400M. The company said proceeds from the sale will be used to reduce debt and will be accretive to EPS. The deal is expected to close during the current quarter.
Stifel also expects Coherent to further improve margins through the development of its 6-inch wafer fab in Sherman, Texas.
"Indeed, the facility will see initial production of InP wafers in August, and as the factory ramps, we expect to see LT tailwinds in both cost (increased utilization) and volume (increased wafer sizes)," Roy added. "As such, considering nicely-progressing manufacturing initiatives and an increasingly-streamlined business portfolio, we now expect adj-GM to exit FY27 at ~40.5%."
In an even more bullish stance, Raymond James reiterated its Strong Buy rating and increased its price target to $134 from $120.
"While share shifts are a reality in this competitive market, capacity remains the main constraint, we think guidance implies datacom sales grow $50M to $100M q/q, which seems prudent, but we can envision better outcomes," said Raymond James analysts, led by Simon Leopold, in a note. "More to the point, the stock was clearly pricing in a strong beat and raise (like Lumentum), but we think the 20% decline in the afterhours is an overreaction as the datacenter/dci trends are robust and expected to sustain into 2026."
Coherent peers Lumentum and Fabrinet shares were down 2.7% and 5%, respectively, during early market trading. |
