Coherent Stock Falls 22% in 6 Months: Is This a Buying Opportunity?

Coherent Corp.'s COHR stock price has declined over the past six months. The stock has plummeted 21.5%, compared with the industry's 9.3% fall and 1.4% decline of the Zacks S&P 500 composite.Six-Month Price Performance Image Source: Zacks Investment Research COHR’s industry peers Cardlytics, Inc. CDLX and Blade Air Mobility, Inc. BLDE have declined over the same period. CDLX and BLDE have lost 36% and 8.1%, respectively.In the last trading session, the COHR stock closed at $65.4, 73.8% down from the 52-week high of $113.6.The fall in the stock might prompt investors to buy it to capitalize on the long-term growth. However, the question of whether it is the right time to buy the stock needs to be answered. Let us analyze it further.AI Advancements Boost COHR’s Datacom SegmentRapid growth in AI requires an exponentially large volume of data, which makes the AI models complex, and demands faster and more efficient data transmission. This growth cycle significantly boosts the demand for Coherent’s datacom products, such as high-speed optical transceivers, thereby increasing its revenues.The surge in 800G transceiver shipments demonstrates the pertinent demand from hyperscalers as they expand AI training and inference workloads. Management has confirmed that 1.6T transceivers will remain the primary contributor to the top line in 2025, hinting at a longer runway for growth beyond the current 800G cycle. Management’s customer evaluation for 1.6T transceivers implies a smooth transition to the next technology cycle without hindering the demand for 800G.In the second quarter of fiscal 2025, the company witnessed 3X growth in its indium phosphide (InP) output on a year-over-year basis. InP is vital for Electro-Absorption Modulated Laser and Continuous Wave lasers, which power high-speed optical transmission in AI data centers. Hence, in-house expansion ensures heightened supply-chain control and cost advantages over competitors.Telecom Recovery Adds to Coherent’s Top LineIn the second quarter of fiscal 2025, revenues in the telecom segment increased 11% year over year and 16% from the preceding quarter. This continued growth and management’s optimistic outlook hint at an improving demand for this segment. Telecom’s recovery is driven by the launch of the latest products, which include 100G, 400G, and 800G ZR/ZR+ coherent transceivers. These products have witnessed solid demand in the second quarter of fiscal 2025.AI workloads are raising traffic between data centers that calls for the telecom industry to boost investments in higher-capacity interconnects, fueling investments in optical transport networks.COHR Stock Looks CheapCoherent stock’s undervaluation is appealing to investors. It is priced at 16 times forward 12-month earnings per share, which is lower than the industry’s average of 44.8 times. Image Source: Zacks Investment Research When looking at the trailing 12-month EV-to-EBITDA ratio, COHR is trading at 10.2 times, way below the industry’s average of 46.5 times. Image Source: Zacks Investment Research Coherent’s Liquidity Beats IndustryThe company has a strong liquidity position, with a current ratio of 2.67 at the end of the second quarter of fiscal 2025, higher than the industry’s 2.08. The metric is higher than 1, implying an efficient short-term debt coverage capability, reassuring financial stability to investors. Image Source: Zacks Investment Research COHR’s Strong Top & Bottom-Line ProspectsThe Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $5.7 billion, indicating 21% growth from the year-ago reported level. For fiscal 2026, the top line is anticipated to rise 9.9% on a year-over-year basis.The consensus estimate for earnings in fiscal 2025 is pegged at $3.48 per share, hinting at more than 100% year-over-year growth. For fiscal 2026, the bottom line is expected to rise 24% on a year-over-year basis.Add Coherent to Your Portfolio NowThe company is well-positioned to benefit from a surge in demand for datacom products, fueled by rapid advancements in AI. Telecom recovery, facilitated by increasing AI workloads, adds to COHR’s top line.Coherent’s discounted valuation, healthy liquidity position, and strong top and bottom-line prospects are green flags for investors.These positive factors should facilitate the company’s long-term growth. When coupled with low prices, we are bound to recommend investors buy this stock and enjoy higher capital returns in the long run.COHR has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Coherent Corp. (COHR): Free Stock Analysis Report Cardlytics, Inc. (CDLX): Free Stock Analysis Report Blade Air Mobility, Inc. (BLDE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks