Coherent Corp's Growth Driven by Nvidia Investment and AI Market Demand
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 14 2024
0mins
Source: WSJ
Coherent Corp's stock rose by 5.02% in pre-market trading, crossing above its 5-day SMA, reflecting strong investor interest.
The recent $2 billion investment from Nvidia has significantly boosted market confidence in Coherent, with analysts projecting a 31% CAGR in revenue through 2028, driven by the demand for its optical products in the AI sector. This investment, along with a reported 23% revenue increase in fiscal 2025, underscores Coherent's transformation into a high-growth AI player, further solidified by government support for its manufacturing expansion.
As Coherent continues to innovate with its ultra-fast optical products, it is well-positioned to capitalize on the growing AI market, making it an attractive investment opportunity for the future.
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Analyst Views on COHR
Wall Street analysts forecast COHR stock price to fall
13 Analyst Rating
9 Buy
4 Hold
0 Sell
Moderate Buy
Current: 335.700
Low
170.00
Averages
238.18
High
300.00
Current: 335.700
Low
170.00
Averages
238.18
High
300.00
About COHR
Coherent Corp. is a vertically integrated manufacturing company that develops, manufactures, and markets lasers, transceivers, and other optical and optoelectronic devices, modules, and systems, as well as engineered materials, for use in the communications, industrial, instrumentation and electronics markets. Its segments include datacenter & communications, and industrial. Its datacenter & communications segment offers optical transceivers, optical circuit switches, interconnect cables, optical instruments, optoelectronic devices, communication components, and wavelength management products. Its industrial segment offers lasers, machines & systems, components & accessories, optics, laser measurement instruments, ceramics & metal matrix, ion implantation, engineered materials, and wide-bandgap electronics. Its subsidiaries include Finisar Australia Pty Limited, Nufibre PTY LTD, Finisar Brasil Suporte De Vendas LTDA, Coherent Aerospace & Defense, Inc., and Coherent Asia, Inc.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Key Supply Agreement: AXT's subsidiary, AXT-Tongmei, will develop and supply 6-inch indium phosphide water substrates to Coherent, which has made a prepayment of approximately $22.29 million, securing future material procurement and strengthening their partnership.
- Capacity Expansion Plans: AXT plans to expand production capacity at its Beijing facility between 2026 and 2028 to meet Coherent's demands, a move that not only enhances the company's production capabilities but also prepares for future market demand growth.
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- Strong Performance from Coherent: Coherent's latest earnings report reveals a 27% year-over-year revenue increase to $1.8 billion, with earnings per share rising 55% to $1.41, reflecting robust demand in the data center and communications sector, although this segment accounts for 75% of its revenue, posing future risks.
- Rapid Growth of Lumentum: Lumentum's total revenue nearly doubled in Q1 2023 to $808.4 million, with its components and systems segments growing by 77% and 121% respectively, showcasing strong performance in the photonics market, though it faces intense competition from Coherent.
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See More
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- Strategic Investments: Nvidia has invested a total of $6 billion across three companies, with $2 billion each in Coherent and Lumentum, and $1 billion in Nokia, aiming to leverage photonics technology to alleviate AI network bottlenecks and enhance data transfer efficiency.
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- Lumentum Growth: Lumentum's total revenue nearly doubled to $808.4 million, with components and systems segments growing 77% and 121% respectively, but it faces intense competition from Coherent, reflected in its high forward price-to-earnings ratio of 50.
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See More
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- Prepayment Arrangement: Coherent will make a prepayment of approximately $22.29 million for future water substrate purchases, providing AXT with liquidity while ensuring Coherent's procurement commitment during the agreement period.
- Termination Clauses: The agreement stipulates that if Coherent fails to meet minimum order requirements, the prepayment becomes non-refundable, allowing AXT to terminate the agreement; conversely, if AXT fails to meet capacity commitments for over six months, Coherent can terminate the agreement and receive a refund for any unused prepayment.
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