Coherent Corp. (NYSE:COHR) shares plummeted on Thursday after the company announced it will sell its aerospace and defense unit to Advent for $400 million.
The company plans to allocate the transaction proceeds toward reducing its debt.
Coherent also posted quarterly earnings of $1 per share, beating estimates of 91 cents, on revenue of $1.52 billion, up from $1.31 billion a year ago and ahead of the $1.5 billion consensus.
Here are the key analysts takes on the stock:
- Bank of America Securities analyst Vivek Arya downgraded the stock from Buy to Neutral, raising the price forecast from $92 to $105.
- JPMorgan analyst Samik Chatterjee reiterated the Overweight rating on the stock, with a price forecast of $127.
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Bank Of America Securities: Coherent’s near-term outlook is mixed, according to BofA. September-quarter data center growth slowed to 24% year over year from 39%–58% in prior quarters and gross margins of 38.1%–38.5% fell short of the 40% seen as key for valuation expansion.
There’s also a $170 million fiscal 2026 revenue headwind from the sale of its aerospace and defense business, which will occur before an Apple contract begins in fiscal 2027. While this contrasts with Lumentum's stronger growth guidance, BofA raised its 2026 and 2027 earnings estimates by 5% and 12% on lower interest costs, lifted its price target to $105 from $92, and maintained a favorable view on Coherent's long-term opportunities in co-packaged optics, optical circuit switches, and AI-driven demand for ZR/ZR+ products within a projected $12 billion communications market by 2030.
JPMorgan: Datacom industry growth remains strong with upward forecast revisions. However, near-term supplier revenue will depend on large customer buying patterns.
The analyst expects Coherent's datacom growth to accelerate as it ramps 1.6T shipments with its main customer, where it holds a stronger position than in 800G.
Long term, Chatterjee sees Coherent meeting revenue goals while shifting its portfolio toward higher-margin areas. Divestitures should improve gross margins and boost earnings through debt reduction.
Diversification across industrial and communications, and a richer product mix, position the company for strong earnings expansion, he added. The earnings outlook remains steady despite lower revenue guidance resulting from the divestiture, thanks to improved margins and reduced interest costs. Expect a compound annual growth rate in earnings per share above 25% from fiscal year 2025 to fiscal year 2028.
Price Action: COHR shares are trading lower by 23.74% to $86.81 at last check Thursday.
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