Needham raises Coherent stock price target to $90, maintains buy rating

On Thursday, Needham, a notable investment firm, increased its price target for Coherent stock (NYSE: NYSE:COHR) to $90, up from the previous $85, while reiterating a Buy rating on the shares. The revision reflects the firm’s confidence in the company’s growth prospects and operational strategy. According to InvestingPro data, Coherent’s stock has shown strong momentum with a 35% return over the past year, despite experiencing significant volatility with a 52-week range of $45.58 to $113.60.

Coherent’s management has confirmed its commitment to advancing photonics technology, which is expected to increasingly replace electrical interconnects in the rapidly expanding data center connectivity sector. Additionally, anticipated gains in the optical WAN communications and industrial lasers markets are projected to support double-digit percentage revenue growth for the company. This aligns with the company’s impressive revenue growth of 22% in the last twelve months, with analysts forecasting 23% growth for the upcoming fiscal year.

Analysts at Needham highlighted that further gross margin expansion and operational expenditure efficiency are anticipated to almost double Coherent’s non-GAAP operating margin to over 24% within the next three to four years. This optimistic outlook is bolstered by expected operational efficiencies stemming from yet-to-be-announced divestitures and the discontinuation of non-core products. InvestingPro analysis shows the company maintains a healthy current ratio of 2.47, indicating strong liquidity to support its operational transformation. Get deeper insights into Coherent’s financial health and access exclusive ProTips with an InvestingPro subscription.

The investment firm sees optics technology as an essential component for the burgeoning Cloud/AI industries. Moreover, it believes that Coherent’s other business segments are well-positioned to deliver solid mid-single-digit percentage growth. With a strategic focus on growth opportunities and prudent divestitures, Needham has reaffirmed its positive stance on Coherent’s stock by lifting its price target.

The updated price target of $90 reflects Needham’s belief in Coherent’s potential to capitalize on the growing demand for photonics and optics technology across various high-growth sectors. The company’s strategic initiatives are expected to drive revenue and margin growth, positioning Coherent favorably in the market.

In other recent news, Coherent Inc. has been the focus of multiple analyst updates following its recent Analyst and Investor Day. BofA Securities raised its price target for Coherent to $92, maintaining a Buy rating, and highlighted the company’s potential for substantial sales and earnings per share growth by fiscal year 2028. Similarly, JPMorgan reiterated its Overweight rating with a price target of $86, noting Coherent’s progress in growth and transformation, particularly in the Datacenter & Communications and Industrial sectors. The firm expects a compound annual growth rate of 10%-15% over the next few years.

Jefferies also maintained a Buy rating with a $110 price target, emphasizing Coherent’s strong positioning in the photonics and data center markets. The company anticipates double-digit growth and earnings per share of $8-9 by fiscal years 2028/29. Meanwhile, Raymond (NSE:RYMD) James increased its price target to $96, maintaining a Strong Buy rating, citing Coherent’s ambitious long-term financial targets, including a gross margin of over 42% and an operating margin above 24%.

Coherent’s management has outlined plans to streamline operations and focus on high-growth opportunities, which are expected to enhance profitability. The company has commenced generating Optical Coherent Solutions revenue ahead of schedule, further boosting investor confidence. These developments reflect a positive outlook from analysts, who believe Coherent is well-positioned for continued growth and profitability improvements in the coming years.

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