Coherent Soars 112% in 6 Months: Buy, Sell or Hold the Stock?

Core Insights - Coherent Corp.'s stock price has surged 111.7% over the past six months, significantly outperforming the industry growth of 13.8% and the Zacks S&P 500 Composite's increase of 13.6% [1][9]. Product Demand and Market Opportunities - Coherent's products, particularly 800G and 1.6T transceivers, are experiencing high demand, with expectations for exponential growth in 2026 due to direct bookings [5]. - The company's Indium Phosphide (InP) products have shown improved yields, and production is set to ramp up in Jarfalla, Sweden, to meet the rising demand for AI datacenters [6]. - The Optical Circuit Switch product is projected to add over $2 billion in addressable market opportunity, supported by a global AI market valued at $390.9 billion, expected to grow at a CAGR of 30.6% through 2033 [7]. Financial Position - As of September 2025, Coherent holds $875 million in cash reserves against a debt of $48 million, indicating a strong liquidity position with a current ratio of 2.33, surpassing the industry average of 1.58 [10]. - The Zacks Consensus Estimate for Coherent's revenues for fiscal 2026 is $6.7 billion, reflecting a 15.1% year-over-year increase, with EPS expected to grow by 44.5% [12]. Analyst Confidence - Over the past 60 days, there have been upward revisions in EPS estimates for fiscal 2026 and 2027, with the consensus for fiscal 2026 earnings increasing by 11.1% [13]. Valuation Concerns - Coherent's stock is currently priced at 32.42 times forward 12-month earnings per share, higher than the industry average of 25.32 times, indicating potential overvaluation [14]. Competitive Landscape - Coherent faces significant competition in the Silicon Carbide (SiC) sector from companies like Wolfspeed and ON Semiconductor, which hold substantial market shares [16]. - The company has experienced a 6% year-over-year decline in its Material segment's revenues in fiscal 2025, highlighting the need for strategic investments to maintain competitiveness [17]. Investment Recommendation - Investors are advised to hold Coherent stock due to its strong growth fundamentals, despite concerns over valuation and competition [18].