Coherent Stock Gains 37% in a Year: Should You Book Profits?

Core Viewpoint - Coherent Corp. (COHR) has experienced significant stock price appreciation over the past year, outperforming its industry and peers, but faces challenges from geopolitical risks and potential delays in hyperscaler investments [1][3][15]. Stock Performance - COHR's stock price has increased by 37.3% over the past year, compared to a 31.2% rise in the industry and a 9.2% gain in the Zacks S&P 500 Composite [1]. - In the past month, COHR's stock gained 38.5%, surpassing the industry's 22.3% increase, while peers Crane NXT and Jamf saw increases of 21.4% and 6.6%, respectively [3]. Geopolitical Risks - Coherent relies on international supply chains, making it vulnerable to geopolitical tensions, particularly between the United States and China, which could disrupt material procurement and manufacturing [7][8]. - Potential tariffs could increase COHR's cost of goods, impacting profitability and the ability to meet consumer demand [7][8][9]. Impact of Hyperscaler Investments - In Q3 of fiscal 2025, COHR reported a 24% year-over-year growth in revenue, driven by demand for AI-related data center products, heavily reliant on investments from hyperscalers [10]. - The current volatility in the AI market may deter hyperscalers from investing in infrastructure, potentially slowing COHR's revenue growth in the datacom segment [11]. Dividend Policy - Coherent has no plans to pay cash dividends, which may deter investors seeking immediate returns, as the only potential benefit comes from share price appreciation [12]. Earnings Estimates - Over the past 60 days, one earnings estimate for fiscal 2025 has been revised downward, with the Zacks Consensus Estimate for fiscal 2025 earnings declining slightly [13]. - For fiscal 2026, similar downward revisions have occurred, indicating cautious sentiment regarding future earnings [13]. Investment Recommendation - Given the challenges posed by geopolitical risks, potential tariffs, and delays in hyperscaler investments, it may be prudent for current investors to consider selling their shares to realize profits [15].