Is Coherent Prepared to Capture the Momentum in the EV Market?

Core Insights - Coherent Corp.'s Silicon Carbide (SiC) substrates are essential for enhancing energy efficiency in electric vehicles (EVs), with the global EV market projected to grow at a CAGR of 32.5% through 2030, presenting significant growth opportunities for the company [1][8] Investment and Financial Performance - Coherent secured a $1 billion investment from Denso Corporation and Mitsubishi Electric Corporation in late 2023, which included minority stakes in the SiC business and supply agreements for substrates and epitaxial wafers, enhancing the company's financial flexibility for SiC expansion [2] - The company reported a 17% year-over-year growth in revenue for the first quarter of fiscal 2026, with gross margin expansion of 249 basis points, following a 23% revenue increase and 400 basis points gross margin growth in fiscal 2025, driven by demand from AI-related datacenters and communications [3][4] Competitive Landscape - Despite strong growth indicators, Coherent faces competitive pressure from Cognex and Applied Materials in the battery process equipment sector, which could impact pricing and market share [5][8] Stock Performance and Valuation - Over the past year, Coherent's stock has increased by 58.5%, outperforming the industry average of 11.8% and surpassing Cognex's 4.7% decline and Applied Materials' 39% growth [6] - Coherent trades at a forward price-to-earnings ratio of 29.58X, which is higher than the industry's 25.22X, while Applied Materials and Cognex trade at 26.19X and 34.13X, respectively [10] - The Zacks Consensus Estimate for Coherent's earnings for fiscal 2026 and 2027 has risen by 9.6% and 3.9% over the past 60 days, indicating positive market sentiment [13]