Coherent Stock Falls 22% in 6 Months: Is This a Buying Opportunity?

Core Viewpoint - Coherent Corp. (COHR) has experienced a significant stock price decline of 21.5% over the past six months, underperforming compared to its industry and the broader market, which raises questions about the timing for potential investment [1][4]. Group 1: Stock Performance - COHR's stock closed at $65.4, which is 73.8$113.6 [4]. - Industry peers, Cardlytics, Inc. (CDLX) and Blade Air Mobility, Inc. (BLDE), have also seen declines of 36% and 8.1%, respectively, during the same period [4]. Group 2: AI and Datacom Segment Growth - The rapid growth in AI is driving demand for Coherent's datacom products, particularly high-speed optical transceivers, which is expected to boost revenues [5]. - Shipments of 800G transceivers are increasing due to demand from hyperscalers, with management indicating that 1.6T transceivers will be a key revenue contributor by 2025, suggesting sustained growth beyond the current cycle [6]. Group 3: Telecom Segment Recovery - In the second quarter of fiscal 2025, the telecom segment's revenues grew by 11% year-over-year and 16% from the previous quarter, driven by new product launches [9]. - The telecom industry's recovery is linked to rising AI workloads, necessitating investments in higher-capacity interconnects and optical transport networks [10]. Group 4: Valuation and Financial Health - Coherent's stock is currently undervalued, trading at 16 times forward 12-month earnings per share, significantly lower than the industry average of 44.8 times [11]. - The trailing 12-month EV-to-EBITDA ratio for COHR is 10.2 times, compared to the industry's average of 46.5 times, indicating a favorable valuation [13]. - The company has a strong liquidity position with a current ratio of 2.67, surpassing the industry's 2.08, which reflects efficient short-term debt coverage [15][16]. Group 5: Revenue and Earnings Prospects - The Zacks Consensus Estimate projects COHR's fiscal 2025 revenues at $5.7 billion, representing a 21$3.48, indicating over 100% year-over-year growth, with a 24% increase expected in fiscal 2026 [18]. Group 6: Investment Recommendation - Coherent is well-positioned to capitalize on the growing demand for datacom products driven by AI advancements, alongside a recovering telecom segment [19]. - The company's discounted valuation, robust liquidity, and strong revenue and earnings prospects present attractive investment opportunities [19][20].