Key Takeaways
- nLIGHT shares have lost 39% over the past three months, after its third-quarter guidance left out about $17 million of product revenue held up by Chinese suppliers.
- Northcoast Research upgraded the stock to Buy on Oct. 7 with a $75 price target, 88% above that day’s close.
- Northcoast’s target is the lowest of the eight on the Street, where the consensus is $87, and it implies nearly 200x next-twelve-months earnings.
- The call looks plausible but stretched: it needs the delayed shipments to go out and investors to pay up again for earnings that are still small.
nLIGHT (LASR) has lost 39% in three months, closing Oct. 7 at $39.88, 53% below its May 11 closing high of $84.95. That same day, Northcoast Research upgraded the stock to Buy with a $75 price target, 88% above that close.
A $17 million hole
The trouble started with second-quarter results on Aug. 6. Revenue hit a record $82.6 million, up 34% year over year, but third-quarter guidance of $63 million to $73 million leaves out about $17 million of product revenue nLIGHT had expected to ship. The holdup is parts and materials from certain Chinese suppliers.
As CEO Scott Keeney put it on the call: “we would have guided higher had it not been for the supply chain challenges that we’re seeing.”
Shares fell more than 20% on Aug. 7 and kept sliding from there.
Northcoast’s case is valuation
Northcoast’s Keith Housum moved the stock up from Neutral, pointing to valuation after the selloff on supply chain concerns.
On the August call, he asked whether the delay was “more of a political football as opposed to a manufacturing delay.” CFO Joe Corso’s answer: “It’s not at all related to manufacturing products, no.”
Defense looks intact, too: nLIGHT won a Joint Laser Weapon System (JLWS) contract with a $627 million ceiling on July 9, and Corso said the initial work “will largely be unaffected by the supply chain issue.”
Does $75 add up?
Here’s the thing: Northcoast’s $75 is now the lowest of the eight targets TIKR tracks, against an $87 consensus. And analysts haven’t cut as the stock fell: the consensus target went from $86 on June 30 to $89 on Sept. 30, while shares went from $69.62 to $38.95.
As of Sept. 18, analysts expect normalized EPS to more than double, from $0.24 in fiscal 2025 to $0.50 in fiscal 2026, then reach $0.63 in 2027 and $1.00 in 2028 (from just four analysts).
At $39.88, nLIGHT trades at [106x] forward earnings. Its own history is little help: thin or negative earnings put that multiple anywhere from -11,398.6x to 4,826.7x over five years.
So run the math. $39.88 ÷ 106x is about $0.38 of earnings a share over the next twelve months, and $75 ÷ $0.38 is nearly 200x, almost double today’s multiple.
Plausible, but a stretch
The risk is China. Corso said the problem “could resolve itself quite quickly or it will take months to quarters.”
I think Northcoast’s call is plausible but stretched. Demand looks real, and management expects to deliver that $17 million in later quarters. But $75 asks investors to pay nearly 200x next-twelve-months earnings for a business that lost $0.65 a share (normalized) in fiscal 2024. Getting there takes a re-rating, or earnings racing toward that $1.00 for 2028.
The third-quarter report is the one to watch. Corso called shipping the backlog in the fourth quarter “a little bit of a question mark.” If those shipments go out, $75 starts to look a lot more reasonable.
So what is nLIGHT stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what nLIGHT could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
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!
