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On Thursday, Needham raised the price target for Coherent (NYSE:COHR) shares to $125 from $120, while maintaining a Buy rating on the stock. Currently trading at $90.1 with a market capitalization of $13.94 billion, the stock has shown significant volatility according to InvestingPro data. The adjustment comes after Coherent reported fiscal second-quarter revenues that surpassed Wall Street expectations by 4%. The company’s strong performance was attributed to its AI-related Datacom transceiver business and improved demand in the Telecom (BCBA:TECO2m) vertical, which are expected to contribute to a robust second half of the fiscal year.
The earnings per share (EPS) for Coherent also exceeded the upper range of the company’s first-quarter guidance, thanks to robust top-line growth, improved gross margins, and better operating leverage. With annual revenue reaching $5 billion and a healthy current ratio of 2.67, the company maintains strong liquidity. However, the report indicated that industrial revenues showed a mixed picture. While there was notable strength in the OLED display manufacturing sector, other areas of the industrial business faced challenges due to broader macroeconomic weakness.
Coherent’s strategic moves, including its ongoing portfolio realignment, were not elaborated upon in detail. Nonetheless, the company managed to reduce its debt by a further $132 million during the quarter. Looking forward, Coherent has provided revenue and non-GAAP EPS guidance for the third fiscal quarter that stands above the consensus estimates, reinforcing the positive outlook.
The analyst from Needham reiterated a Buy rating, signaling confidence in Coherent’s financial health and market position. This rating indicates the firm’s belief that Coherent’s stock will perform well in the market over the near term. With the revised price target and sustained positive guidance, investors may see this as a sign of the company’s potential for continued growth.
In other recent news, Coherent has been in the spotlight due to its impressive second quarter performance. The company reported adjusted earnings per share of $0.95, surpassing analyst estimates of $0.69, and revenue hit $1.44 billion, a 27% year-over-year increase, beating the consensus forecast of $1.37 billion. These results were driven by robust demand in AI-related data center applications and growth in the telecom business, leading to significant improvements in gross margin and operating margin.
In response to these developments, Rosenblatt Securities has raised its price target for Coherent from $105 to $115, while maintaining a Neutral rating on the stock. The firm’s revised estimate is based on Coherent’s strong performance and the potential for future growth. The Rosenblatt analyst anticipates that Coherent’s growth narrative could gain momentum in fiscal year 2026, with the upcoming Analyst Day in May 2025 expected to serve as a potential positive catalyst.
However, Rosenblatt is still looking for additional signs of progress in Coherent’s financial and operational performance, including enhancements in margins, balance sheet strength, and industrial exposure before altering its rating. For the third quarter, Coherent projects adjusted earnings per share between $0.75 and $0.95, and expects revenue to range from $1.39 billion to $1.48 billion.
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