Key Takeaways
- Bernstein kept its Outperform rating and $350 price target on Coherent on Nov. 10, 46% above today’s price, with the stock 48% below its June high.
- Coherent’s fiscal first-quarter revenue rose 50%, but operating cash flow was negative as it spent heavily on factories and inventory.
- Analysts have kept raising their earnings estimates since the report, and $350 is about 30x the next twelve months’ expected earnings, against a five-year average of 24x.
- The target looks within reach if estimates keep rising, and the next report in early February has to show the cash.
Coherent (COHR) sits 48% below the closing high it hit on June 2, and Bernstein isn’t backing off. On Nov. 10, analyst Daniel Zhu reiterated his Outperform rating and $350 price target, 46% above today’s price.
Big growth, bigger bills
On Nov. 4, Coherent reported fiscal first-quarter revenue up 50% to $2.37 billion and non-GAAP EPS up 80% to $2.09. It also signed a PhotonLink deal with a major AI company worth about $20 billion over five years, with revenue starting to ramp in early 2028.
But the quarter burned cash. Operating cash flow was negative $92.7 million, capex reached $775.5 million, and inventory climbed to $3.34 billion from $2.58 billion in June. CFO Sherri Luther said on the earnings call that the company’s “conviction to deploy this capital at an accelerated rate is backed by exceptional customer visibility.”
Investors weren’t convinced. Coherent sank the day after the report as Democrats’ midterm wins hit AI stocks.
TIKR tracks 26 analysts on Coherent. How many say “Buy”?
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Does $350 add up?
Bernstein has kept the $350 target it set when it initiated coverage on Sept. 30 through the slide, which leaves it below the Street. The consensus target has more than doubled over the past year, from $169 to $372, though it’s down from a peak of $416 on Aug. 19.
Earnings estimates are still climbing. Analysts expect normalized EPS of $10.41 for the fiscal year ending June 2027 and $15.79 for fiscal 2028, up from $5.61 in fiscal 2026:
And they’ve gone up since the report: the fiscal 2027 figure was $9.42 a month ago and $8.38 three months ago.
Rising estimates and a falling stock pulled Coherent’s forward P/E down to 18x at the last close (a bit higher at today’s price). That’s below its five-year average of 24x and nowhere near the 57x it hit on June 2:
Bernstein’s $350 works out to about 30x the next twelve months’ consensus earnings, above the five-year average. But a year from now, those twelve months will be mostly fiscal 2028, where the consensus is $15.79.
Within reach, if the cash shows up
Coherent is making a big bet. It had $11.8 billion of purchase commitments to vendors at June 30, more than its fiscal 2026 revenue of $7.1 billion, and one customer bought 20% of that revenue.
I think Bernstein has this one right, and the selloff went too far. The target doesn’t need anything like the June multiple, just earnings that keep rising the way they have since the report. The next test is the fiscal second-quarter report in early February, where Coherent needs to show operating cash flow turning positive.
So what is Coherent stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
