On Monday, B.Riley maintained a Buy rating on Coherent (NASDAQ:NYSE:COHR) shares and increased the price target to $77.00, up from the previous $74.00. The firm's analyst cites a positive outlook for the company following the Optical Fiber Communication Conference and Exhibition (OFC).
The new price target is based on a 7x enterprise value/sales multiple for the Silicon Carbide (SiC) segment and an adjusted 2.5x (previously 2.4x) for the remainder of the business, according to forecasts for the fiscal year 2025, minus net debt.
Coherent's strong foothold in the AI and datacenter market is highlighted, with its 800G products achieving an impressive $900 million annual run-rate. The company's new Optical Communication Solutions (OCS) is also expected to serve as a growth catalyst. Notably, Google (NASDAQ:GOOGL) has already integrated Coherent's OCS into its operations, and there is potential for further adoption by other companies in the next one to two years.
The analyst believes that the optical industry is on the brink of a significant transformation, particularly in the realm of optical connectivity. Coherent, with its robust product portfolio, is positioned to be at the forefront of this industry shift, leading the change from the optics side. This transformation is anticipated to unfold over the next four to five years, suggesting a period of dynamic development within the sector.
InvestingPro Insights
With B.Riley's recent endorsement of Coherent (NASDAQ:COHR), investors might be curious about the company's financial health and market performance. According to InvestingPro data, Coherent boasts a market capitalization of $6.12 billion and has shown a revenue growth of 4.52% over the last twelve months as of Q2 2024. Despite a quarterly revenue decline of 17.43% in Q2 2024, the company has demonstrated significant price returns, with an impressive 85.72% increase over the past six months and a strong year-to-date return of 39.26%.
InvestingPro Tips indicate that analysts have revised their earnings upwards for the upcoming period, suggesting optimism for Coherent's financial prospects. Additionally, the company's liquid assets exceed short-term obligations, providing financial stability. For investors interested in deeper analysis and more InvestingPro Tips, there are 11 additional tips available that can provide further insight into Coherent's valuation and market potential. To access these insights and optimize your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/COHR.
The raised price target by B.Riley, Coherent's strong market performance, and the positive revisions by analysts all contribute to a promising outlook for the company. As Coherent continues to innovate within the optical industry, these InvestingPro Insights offer valuable context for investors monitoring the company's trajectory.
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