Balanced Outlook: Growth in 800G Segment Offset by Broad Business Challenges Justifying a Hold Rating for Coherent Corp

Coherent Corp (COHR – Research Report), the Technology sector company, was revisited by a Wall Street analyst yesterday. Analyst Christopher Rolland from Susquehanna reiterated a Hold rating on the stock and has a $55.00 price target.

Christopher Rolland’s Hold rating on Coherent Corp’s stock is due to a mixture of both positive and negative business developments. While the company demonstrated strong growth in its 800G transceiver segment, driven by AI-related demand, this was counterbalanced by a general softness in other parts of the business. The company’s 800G segment is anticipated to continue its growth momentum, yet Coherent’s other segments, such as Telecom and industrial verticals, are experiencing slower growth or flat results, with a cautious outlook on recovery timing. Additionally, challenges in the SiC market and operational setbacks have tempered growth expectations.
Moreover, Coherent is facing issues like a declining backlog, which is expected to persist as lead times shorten, indicating a potential future risk. Their book-to-bill ratio has fallen below one, suggesting that new orders aren’t keeping pace with completed sales, which is a concern for future revenue sustainability. Gross margins were also impacted negatively by lower yields, a power outage affecting SiC substrate growth, and increased inventory provisions. These factors combined lead to a less optimistic view of the core business’s near-term recovery prospects, warranting a cautious stance and justifying the Hold rating.

According to TipRanks, Rolland is a top 25 analyst with an average return of 25.8% and a 68.55% success rate. Rolland covers the Technology sector, focusing on stocks such as Intel, Nvidia, and Broadcom.

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Coherent Corp (COHR) Company Description:

II-VI, Inc. engages in the development, refinement, manufacturing, and marketing of engineered materials and opto-electronic components and devices for precision in the field of industrial materials processing, optical communications, aerospace and defense, consumer electronics, semiconductor capital equipment, life sciences, and automotive applications and markets. It operates through the following three segments: Laser Solutions, Photonics, and Performance Products. The Laser Solutions segment designs, manufactures, and markets optical and electro-optical components and materials sold under the II-VI Infrared brand name. The Photonics segment manufactures crystal materials, optics, microchip lasers, and optoelectronic modules for use in optical communications networks and other diverse consumer, life sciences, and commercial applications. The Performance Products segment designs, manufactures, and markets infrared optical components and high-precision optical assemblies for aerospace and defense, medical, and commercial laser imaging applications. The company was founded Carl J. Johnson in 1971 and is headquartered in 1971 and is headquartered in Saxonburg, PA.