Coherent Stock Jumps 31% in 6 Months: How Should Investors Play?
Coherent Corp.'s COHR stock price has increased significantly over the past six months. The stock has gained 30.6% compared with the industry's 74.6% rally and the Zacks S&P 500 composite's 11.7% growth.
Six Months Price Performance
COHR has performed better than its industry peers, Lumen Technologies LUMN and Bitfarms Ltd. BITF. LUMN has declined 17.7% and BITF has fallen 39% over the same period.
In the last trading session, the COHR stock closed at $87.3, 23.2% down from the 52-week high of $113.6.
Investors might be impressed by the stock’s past six-month performance. However, the decision to ride the rally wave or stay away from it should be based on the thorough analysis done hereunder.
Expanding Communications Market Aids COHR
Over the past few quarters, Coherent has generated an average of 53% of its revenues from the communications market. Revenues from this market in the second quarter of fiscal 2025 rose 6.3% from the preceding quarter and 58.3% in the year-ago quarter. This financial performance paints an optimistic picture for COHR’s future. The cherry on top is the expected expansion of the communications market at a CAGR of 14% (2023-2028), which currently stands at a total addressable market of $23 billion.
COHR operates under two verticals — telecom and datacom — in the aforementioned market. Telecom’s extensive portfolio includes transmitters, transceivers, optical cables and receivers, which are anticipated to benefit from open disaggregated systems and pluggable coherent transceivers. In datacom, the company benefits from the solid portfolio of optical transceivers (100GB to 800GB) compatible with Ethernet and InfiniBand switches, wavelength switches, and specialized lasers. This vertical is expected to gain from rising spend on cloud infrastructure, and increasing demand for AI and ML.
In conclusion, the company’s robust performance in the communications market, shown by consistent revenue generation and promising growth figures, paves the path for COHR’s success. With the market expanding on the back of cloud computing, AI and improving network architectures, Coherent’s established presence in telecom and datacom segments offers a favorable opportunity to grab the rising share of this burgeoning market, propelling sustained revenue growth and strengthening market leadership.
COHR Stock Looks Undervalued
Coherent’s stock looks cheap and appealing to investors. It is priced at 22.9 times forward 12-month earnings per share, which is lower than the industry’s average of 48.9 times.
When looking at the trailing 12-month EV-to-EBITDA ratio, COHR is trading at 12.9 times, far below the industry’s average of 102.1 times.
Coherent’s Liquidity Beats Industry
The company has a strong liquidity position, with a current ratio of 2.67 at the end of the second quarter of fiscal 2025, higher than the industry’s 2.21. Despite a 7.3% decline from the year-ago quarter, the metric remains higher than 1, indicating efficient short-term debt coverage capability.
COHR’s Strong Top & Bottom-Line Prospects
The Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $5.7 billion, indicating 21% growth from the year-ago reported level. For fiscal 2026, the top line is anticipated to rise 9.9% on a year-over-year basis.
The consensus estimate for earnings in fiscal 2025 is pegged at $3.47 per share, hinting at more than 100% year-over-year growth. For fiscal 2026, the bottom line is expected to rise 24.6% on a year-over-year basis.
Jump the Bandwagon & Buy Coherent Now
The company is well-positioned to capitalize on the expanding communications market and witness an increase in its top line. This increases the likelihood for COHR to capture a greater market share and strengthens its market leadership.
Coherent is an undervalued stock, which is certainly appealing to investors. Its robust liquidity position, and strong top and bottom-line prospects look promising.
We suggest investors buy the stock now on the back of the positive factors to enjoy higher capital returns in the long run.
COHR has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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