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Investing.com - BofA Securities downgraded Coherent (NYSE:COHR) from Buy to Neutral on Thursday, while raising its price target to $105.00 from $92.00. According to InvestingPro data, the stock appears overvalued at current levels, despite showing impressive returns of over 70% in the past year.
The downgrade comes as Coherent faces decelerating growth in its data center business, which slowed to 24% year-over-year in the September quarter compared to 39%, 46%, and 58% in the previous three quarters. This slowdown contrasts with stronger AI capital expenditure and new product launches at AI accelerator vendors. The company’s overall revenue growth remains robust at 23.42%, though InvestingPro analysis shows it’s currently trading at a high EV/EBITDA multiple of 21.5x.
BofA also cited modest gross margin trends despite multiple restructuring actions, with margins ranging between 38.1% and 38.5%, below the 40% baseline rate considered critical for price-to-earnings multiple expansion. However, InvestingPro data shows the company maintains strong liquidity with a current ratio of 2.19, suggesting adequate financial flexibility during this transition period.
The sale of Coherent’s aerospace and defense business creates approximately $170 million in growth headwinds for fiscal year 2026, with a new Apple contract only expected to contribute in the second half of calendar year 2026.
BofA raised its Coherent estimates by 5% for calendar year 2026 and 12% for 2027 due to lower interest expense, while increasing its price objective based on a 21x calendar year 2026 price-to-earnings multiple, up from 19x previously.
In other recent news, Coherent reported its fourth-quarter fiscal 2025 results, surpassing consensus expectations with revenue and earnings per share both exceeding estimates. Despite this positive performance, the company’s adjusted operating margin did not meet Street expectations. Following these results, several analyst firms have adjusted their price targets and ratings for Coherent. Stifel raised its price target to $118, maintaining a Buy rating, while Raymond James increased its target to $134, keeping a Strong Buy rating. Needham reiterated a Buy rating with a $120 price target, citing strong growth in Coherent’s data center segment. However, Rosenblatt lowered its price target to $135, maintaining a Buy rating, noting the company’s conservative guidance. In other developments, Nova Minerals has received support from Alaska officials and an Australian diplomat for its Estelle Gold and Critical Minerals Project. The project discussions included infrastructure needs such as the West Susitna Access Road and Port MacKenzie upgrades.
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