On Friday, B.Riley changed its stance on Coherent (NYSE:COHR), moving the stock from a Buy to a Neutral rating, while maintaining a price target of $86.00. The firm noted that Coherent's shares had surged significantly, outpacing the Nasdaq's gains.
Coherent, a company previously highlighted for its robust position in the AI/data center transceiver market, has seen its shares climb 142% year-to-date compared to the Nasdaq's 24% increase. This growth has surpassed B.Riley's price target. Coherent's success has been linked to its role as a key supplier to NVIDIA Corp. (NASDAQ:NVDA), although NVIDIA is not currently rated by B.Riley.
The company's financial performance has been impressive, with revenue from 800G products soaring to over $250 million in the fourth quarter from $150 million in the first half of 2024. Industry checks suggest that the demand for 800G will likely continue to be strong for the next two to three quarters.
Despite the positive outlook for 800G demand, B.Riley's recent checks indicate a potential shift in NVIDIA's supplier landscape. NVIDIA may have brought on board another supplier, Eoptolink, for its 1.6T products. This development introduces uncertainty regarding future allocations of NVIDIA's 1.6T transceivers among current suppliers, including Coherent, Innolight, and Fabrinet (NYSE:NYSE:FN), which holds a Neutral rating and a $196 price target, as well as the new entrant, Eoptolink.
In other recent news, Coherent Corp. reported a 9.1% year-over-year increase in fourth-quarter revenue, reaching $1.31 billion, and adjusted earnings per share at $0.61, exceeding the consensus forecast. Needham analysts have maintained a positive stance on the company, raising their price target to $120, while reiterating their buy rating. The company's AI transceiver business is seen as a significant contributor to its growth prospects, along with improvements in the OLED and semiconductor capital equipment sectors.
Coherent also announced major leadership changes, including the appointment of Sherri Luther as CFO and the promotion of current CEO, James R. Anderson, to President. These developments are expected to further the company's financial strategy. Additionally, the company has made strategic moves to divest non-core assets, such as the sale of its Newton Aycliffe manufacturing facility in the UK.
Coherent has also unveiled advanced transceiver modules at the European Conference on Optical Communication, aimed at enhancing data transmission speeds and efficiency. The company's first-quarter revenue for fiscal 2025 is anticipated to fall between $1.27 billion and $1.35 billion, with adjusted earnings per share projected to range from $0.53 to $0.69. These are among the recent developments shaping the trajectory of Coherent Corp.
InvestingPro Insights
Recent data from InvestingPro adds depth to Coherent's (NYSE:COHR) financial picture. The company's market capitalization stands at $15.52 billion, reflecting its significant presence in the AI/data center transceiver market. Coherent's impressive year-to-date price return of 134.48% aligns with B.Riley's observation of the stock's substantial outperformance compared to the Nasdaq.
InvestingPro Tips highlight Coherent's strong performance, noting a "high return over the last year" and that the stock is "trading near 52-week high." These tips corroborate B.Riley's rationale for downgrading the stock to Neutral, as the share price has surged beyond their price target.
However, investors should note that Coherent's P/E ratio (Adjusted) for the last twelve months as of Q4 2024 stands at -66.06, indicating the company was not profitable during this period. This aligns with another InvestingPro Tip stating that Coherent was "not profitable over the last twelve months."
For readers interested in a more comprehensive analysis, InvestingPro offers 16 additional tips for Coherent, providing a deeper understanding of the company's financial health and market position.
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