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%."