Key Takeaways
- Coherent (COHR) stock fell 8% during the week ended November 6, closing at $193 despite a sharp Friday rebound.
- Marvell Technology (MRVL) agreed to acquire Lumentum (LITE) in a $115 billion all-stock deal, potentially strengthening competition in AI optical connectivity.
- J.P. Morgan reiterated its $385 Coherent price target, implying approximately 100% upside from Friday’s closing price.
- Coherent’s quarterly revenue grew 50% year over year, but negative operating cash flow and heavy capital spending remain significant risks.
What Happened?
Coherent (COHR) stock fell approximately 8% over the past week, closing at $193 on November 6 as investors weighed the company’s latest earnings, a major competitor acquisition, and concerns about AI infrastructure spending.
According to historical trading data, shares fell nearly 13% on Thursday before rebounding approximately 14% on Friday, highlighting uncertainty surrounding the company’s growth outlook.
On November 2, Marvell announced its $115 billion acquisition of Lumentum, combining Marvell’s semiconductor expertise with Lumentum’s optical technologies.
The all-stock transaction carries a roughly 24% premium to Lumentum’s unaffected share price and is expected to close in the first half of 2028. The $115 billion figure represents the deal’s implied enterprise value.
For Coherent, the acquisition presents both an opportunity and a challenge. Its independent optical technology portfolio could become more strategically valuable, but the combined Marvell-Lumentum business may compete more effectively for major AI data center customers.
Meanwhile, Coherent’s November 4 earnings release reinforced strong demand for its products.
Fiscal first-quarter revenue increased 50% year over year to $2.37 billion, while non-GAAP earnings rose to $2.09 per share from $1.16 a year earlier.
CEO Jim Anderson highlighted the company’s expanding opportunities, saying: “Our established businesses delivered strong growth, while new growth areas are beginning to ramp.”
Management projected second-quarter revenue between $2.55 billion and $2.75 billion and expects fiscal 2027 pro forma revenue growth to exceed 60%.
Coherent’s Datacenter and Communications segment generated approximately $1.95 billion in quarterly revenue, up 79% year over year, demonstrating the impact of expanding AI infrastructure demand.
However, investors remain concerned about the capital required to support this growth.
Is Coherent Stock Undervalued or Overvalued?
Coherent appears potentially undervalued based on its earnings-growth outlook, although weak cash generation makes the investment case more speculative.
TIKR’s October 30 estimates projected normalized EPS increasing from $5.61 in fiscal 2026 to $9.40 in fiscal 2027 and $13.91 in fiscal 2028, reflecting expectations for substantial earnings expansion.
Coherent traded at approximately 22x forward earnings on October 30, below its five-year historical average of roughly 24x, suggesting investors were assigning a lower valuation to its growth prospects.
J.P. Morgan reiterated its $385 price target on November 5, representing approximately 100% upside from Coherent’s November 6 closing price of $192.80.
At a 24x earnings multiple, that target would require approximately $16 in forward annual EPS, making continued earnings growth essential to the bullish valuation case.
The biggest concern is cash generation. Coherent used approximately $93 million in operating cash during its latest quarter while investing nearly $776 million in property, plant, and equipment, highlighting the cost of expanding production capacity.
Still, non-GAAP gross margin improved to 40.6% from 38.7% a year earlier, suggesting improving underlying profitability despite elevated spending.
Over the next 12 months, Coherent’s valuation will depend on sustaining AI-driven revenue growth, improving cash conversion, and maintaining margins while navigating stronger competition.
At around $193, Coherent offers substantial upside potential if management executes successfully, but continued cash outflows could prevent the stock from approaching J.P. Morgan’s $385 target.
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!
