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On Thursday, BofA Securities updated its outlook on Coherent Inc. (NYSE:COHR), boosting the price target to $92 from the previous $80 while keeping a Buy rating on the shares. The stock, currently trading at $78.25, has shown significant volatility with a 52-week range of $45.58 to $113.60. According to InvestingPro data, the company has demonstrated strong momentum with a 34.87% return over the past year. The firm’s analysts highlighted Coherent’s recent NYC Analyst Day, noting the company’s unique portfolio and supply chain strengths that position it to capitalize on various high-growth opportunities. Coherent is expected to increase its market share within the $32 billion data center serviceable addressable market (SAM) by the calendar year 2030.
The analysts pointed out that Coherent’s revised target model suggests substantial sales and per-forma earnings per share (EPS) growth, projecting an 11% and 19% upside respectively above Street estimates for fiscal year 2028. This aligns with the company’s impressive revenue growth of 21.67% over the last twelve months. InvestingPro analysis reveals that while the company isn’t currently profitable, analysts expect positive earnings this year, with an EPS forecast of $3.60 for FY2025. Although these targets are slightly below the initially soft expectations for approximately 45% gross margins and $8+ EPS, they indicate earnings power of $7-$8 by FY28.
Coherent’s financial targets precede any benefits from potential portfolio optimizations. The analysts believe that if Coherent successfully divests non-core assets and refines its operating model, it could achieve or even exceed these financial goals sooner than expected. BofA Securities has reiterated its confidence in Coherent’s ability to evolve its gross margins from the high-30% range to the low-40% range, which should warrant an expansion of the price-to-earnings (PE) multiple above the historical median of around 15 times.
The new price target is based on a 19 times multiple of the estimated PE for the calendar year 2026, up from the previously used 17 times multiple. The valuation is considered attractive by the analysts, as it represents only a 10-11 times PE based on Coherent’s long-term EPS power. The positive outlook reflects BofA Securities’ view that Coherent is well-positioned for continued growth and profitability improvements. InvestingPro analysis shows the company maintains a healthy financial position with a current ratio of 2.47 and has received an overall "GOOD" Financial Health score. For deeper insights into Coherent’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Coherent has been the focus of several analyst reports following its Analyst & Investor Day. The company reported a significant 46% year-over-year increase in Data Center & Communications revenue for the March quarter, with a robust 54% growth in Datacom revenue. Despite this momentum, Coherent’s guidance for the June quarter suggests flat revenue, as growth in Data Center & Communications is expected to be offset by a slight decline in Industrial revenue. Analysts at Stifel maintained a Buy rating with a $100 target, highlighting Coherent’s strategic portfolio optimization.
JPMorgan reiterated its Overweight rating with an $86 target, emphasizing Coherent’s growth trajectory and potential revenue growth in the Datacenter & Communications and Industrial sectors. Jefferies also maintained a Buy rating with a $110 target, projecting double-digit growth and profitability, with earnings per share expected to reach $8-9 by fiscal years 2028/29. Raymond (NSE:RYMD) James increased its price target to $96, maintaining a Strong Buy rating, citing Coherent’s ambitious long-term financial targets, including gross and operating margin improvements.
These developments reflect analysts’ confidence in Coherent’s strategic direction and potential for significant growth and profitability in the coming years.
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