BofA warns Fed risks policy mistake with early rate cuts
On Monday, Raymond (NSE:RYMD) James analyst Simon Leopold upgraded Coherent stock, traded on the New York Stock Exchange under the ticker (NYSE:COHR), from Outperform to Strong Buy, adjusting the price target to $91.00 from a previous $110.00. Currently trading at $68.24, the stock sits well below the analyst consensus range of $80-$136, with 16 analysts recently revising their earnings estimates upward according to InvestingPro data. The revision follows recent industry events that have shaped the analyst’s perspective on the optical communications sector.
Leopold’s decision to upgrade Coherent’s stock rating is based on insights gained from Nvidia (NASDAQ:NVDA)’s GTC and Corning (NYSE:GLW)’s analyst day meetings. With a market capitalization of $10.57 billion and a beta of 1.69, Coherent shows significant market sensitivity. He believes that the market has overly penalized Coherent and Lumentum shares due to concerns about Co-Packaged Optics (CPO), which he considers to be exaggerated. The analyst has revised his proprietary datacom optical model to reflect a strong demand for 800G solutions, Nvidia’s product roadmap, and the emergence of CPO/LPO form-factors, as well as updated estimates for non-A.I. datacom.Want deeper insights? InvestingPro offers comprehensive analysis with 12 additional ProTips and detailed financial metrics for Coherent.
The revised model by Raymond James predicts significant growth in the A.I. backend transceiver market, with sales reaching $22.2 billion by 2030, which would represent a compound annual growth rate (CAGR) of approximately 30% from 2024. Coherent’s current revenue growth of 14.61% and projected 21% growth for FY2025 align with this positive industry outlook. The new estimate for A.I. backend sales in 2027 is set at $7.5 billion, up from $7.1 billion previously forecasted. Leopold points to Nvidia’s Blackwell order disclosures as a reason to expect an upside to near-term 800G estimates, with projections of 15 million units in 2025.
In addition to the datacom sector, the optical telecom market, which encompasses wide area network applications such as data center interconnects, is showing signs of recovery. Furthermore, the industrial laser segment is reportedly bottoming out, with various sub-sectors on different recovery paths. Leopold anticipates that the upcoming OFC trade show could bring more clarity to the CPO market and potentially serve as a positive catalyst for Coherent and Lumentum stocks. For comprehensive analysis of Coherent’s market position and growth potential, access the full Pro Research Report available exclusively on InvestingPro.
In other recent news, Coherent Corp. has reported fiscal second-quarter revenues that exceeded Wall Street expectations by 4%, driven by strong performance in its AI-related Datacom transceiver business and improved demand in the Telecom (BCBA:TECO2m) sector. Earnings per share also surpassed the company’s guidance due to robust growth and better operating leverage. Needham has responded by raising Coherent’s stock price target to $125, maintaining a Buy rating, reflecting confidence in the company’s financial health. Meanwhile, Jefferies has initiated coverage on Coherent with a Buy rating and a $110 price target, citing the company’s strong position in the 400G transceiver market and potential for profitability improvements.
Coherent has also launched the 2x400G-FR4 Lite optical transceiver, which promises reduced power consumption for AI-driven data centers and high-speed networks. This new product is expected to be generally available by April 2025. Additionally, Coherent introduced the WaveAnalyzer 1500B, an advanced optical spectrum analyzer aimed at enhancing transceiver testing capabilities. This device is set to ship in May, with first deliveries scheduled for July 2025.
In related developments, Applied Optoelectronics (NASDAQ:AAOI) has secured a significant arrangement with Amazon (NASDAQ:AMZN), involving a warrant for the purchase of up to 7.95 million shares. This deal has led Rosenblatt Securities to reaffirm a Buy rating for the company, highlighting its expected role in the 800+G transceiver market for AI applications. These recent developments underscore both Coherent’s and Applied Optoelectronics’ strategic moves to strengthen their positions in the photonics and transceiver markets.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.