Key Takeaways
- Coherent jumped 13% today after Citi raised its target to $440, and Lumentum and Marvell bounced too.
- Wall Street is split on Coherent’s quarter: Citi and Stifel raised their targets, while BofA and others cut theirs.
- Earnings are growing fast, but operating cash flow was negative $93 million in the September quarter.
- Today’s jump looks like a group rebound, and the December-quarter report in early February is the next test.
Coherent (COHR) stock is up 13% today after Citi raised its price target to $440 from $420. That’s a day after shares fell 14% on a quarter that beat its own earnings guidance.
Coherent has company. Lumentum (LITE) is up 3%, and so is Marvell Technology (MRVL), which agreed on Monday to buy Lumentum in a $115 billion all-stock deal. All sold off Wednesday and Thursday on worries the Democrats’ midterm sweep would hit data center spending. Credo Technology (CRDO) is up 4% and Astera Labs (ALAB) is up 1%.
Wall Street can’t agree on this quarter
In Wednesday’s report, revenue rose 50% to $2.37 billion in the September quarter, and non-GAAP EPS rose 80% to $2.09. “We expect fiscal 2027 pro forma revenue growth to exceed 60%,” CEO Jim Anderson said in the release.
The cash was another story. Operating cash flow was negative $93 million as capex hit $776 million and inventory climbed to $3.3 billion from $2.6 billion in June.
So the Street split. Citi and Stifel (to $450 from $420) raised their targets, while BofA cut to $240 from $400.
Going into the report, analysts expected normalized EPS to climb from $5.61 in fiscal 2026 to $9.42 this fiscal year and $13.97 the next:
A quarter that beat the top of its own EPS guidance gives me no reason to expect those estimates to come down.
TIKR tracks 26 analysts on Coherent. How many say “Buy”?
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Show me the cash
Against that fiscal 2028 estimate, Citi’s $440 target is about 31x earnings and BofA’s $240 is about 17x. Coherent’s forward P/E was 21x at the start of the week. That’s below its five-year average of 24x and far from its June peak of 57x:
Even after today’s jump, the stock is below where it started the week.
The way I see it, today is the optics group bouncing back. Coherent’s earnings case holds up, and below its average multiple, the stock prices in a lot of the cash worry. Reaching Citi’s or Stifel’s targets will take positive cash flow, though.
The next check comes with the December-quarter report in early February. If cash flow is negative again and inventory is still climbing, I’d side with BofA.
So what is Coherent stock actually worth?
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