Coherent Stock Falls 41% YTD: Buying Opportunity or Red Flag?

Coherent Corp.'s COHR stock price has declined over the year-to-date period. The stock has plummeted 40.7% compared with the industry's 15.1% fall and the 8.8% decline of the Zacks S&P 500 composite.COHR’s industry peers Yext, Inc. YEXT and Vontier Corporation VNT have declined over the same period. YEXT and VNT have lost 7.1% and 17%, respectively.YTD Price Performance Image Source: Zacks Investment Research In a year, Coherent has underperformed its industry and Yext while outperforming Vontier. COHR shares have gained 5.8%, underperforming the industry’s 12.6% growth and Yext’s 7.5% rise. Shares of Vontier have declined 25.3% in a year.In the last trading session, the COHR stock closed at $56.1, 102.5% down from the 52-week high of $113.6.Investors might be readily bent toward buying COHR, which has declined for the past six months. However, the question of whether investors should buy this stock or stay away from it needs to be answered. Let us dive deep.Telecom Recovery & Datacom Segment Boom Benefit COHRThe Telecom segment’s revenues increased 11% year over year and 16% from the preceding quarter in the second quarter of fiscal 2025. This persistent growth and management’s optimistic outlook indicate an improving demand for this segment. The launch of the latest products, which include 100G, 400G and 800G ZR/ZR+ coherent transceivers that sustained solid demand in the second quarter of fiscal 2025, facilitated Telecom’s recovery.Rising AI workloads are increasing traffic between data centers, which calls for the telecom industry to boost investments in higher-capacity interconnects, fueling investments in optical transport networks.The exponential increase in AI results in large data volume, making complex AI models demand faster and more efficient data transmission. The demand for COHR’s datacom products, including high-speed optical transceivers, significantly increased due to this growth cycle. Shipment of 800G transceivers has risen due to robust demand from hyperscalers as they expand AI training and inference workloads.Management expects 1.6T transceivers to be the primary top-line contributor in 2025, indicating growth beyond the current 800G cycle. Customer evaluation for 1.6T transceivers performed by management shows the smooth transition to the next cycle of technology without hurting the demand for 800G.In the second quarter of fiscal 2025, Coherent 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 healthy supply-chain control and cost advantages over competitors.COHR Stock Looks CheapCoherent stock’s undervaluation is appealing to investors. It is priced at 13.56 times forward 12-month earnings per share, which is lower than the industry’s average of 27.06 times. Image Source: Zacks Investment Research When looking at the trailing 12-month EV-to-EBITDA ratio, COHR is trading at 9.09 times, below the industry’s average of 19.54 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 1.63. The metric is higher than 1, implying an efficient short-term debt coverage capability.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 expected to increase 9.9% on a year-over-year basis.The consensus estimate for fiscal 2025 earnings is pegged at $3.48 per share, hinting at more than 100% year-over-year growth. For fiscal 2026, the bottom line is estimated to rise 24% on a year-over-year basis.Hurry & Buy Coherent NowCOHR capitalizes on the AI-led telecom recovery and growing demand for datacom products, boosting its top line. The company’s discounted valuation, healthy liquidity position, strong capital returns, and robust top and bottom-line prospects are attractive to investors. The stock’s year-to-date decline positions it well for investors to buy in cheap and expect a greater return. Hence, we urge investors to add Coherent shares to their portfolios now.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 +23.9% 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 Yext (YEXT): Free Stock Analysis Report Vontier Corporation (VNT): 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