Coherent (COHR) shares have traded in a tight band in recent sessions, mirroring the broader consolidation among major artificial intelligence names. The stock changed hands at $309.60 on Friday, roughly 30% below its 52-week peak, yet the company's optical networking franchise may be poised to benefit from a supply crunch elsewhere in the industry.
Lumentum flags sold-out capacity
Lumentum chief executive Michael Hurlston said demand for optical solutions has continued to climb this year. He noted the company is fully sold out through 2029 and expects to struggle to satisfy as much as 70% of demand for certain products through next year. That commentary carries weight for Coherent, which produces comparable optical components and was itself the target of a $5.7 billion takeover attempt by Lumentum in early 2021. The bid ultimately failed after II-VI submitted a richer offer.
Coherent's own demand trajectory
The sold-out backdrop at Lumentum reinforces the view that data center operators remain hungry for optical connectivity. Coherent's latest quarterly results showed revenue climbing to $2.04 billion in the fourth quarter, up from $1.52 billion a year earlier. Analysts expect that momentum to persist, particularly following the launch of PhotonLink, an integrated optics platform that unites the company's photonics portfolio across co-packaged optics, near-packaged optics, and chip-to-chip connectivity.
Consensus forecasts call for first-quarter revenue to rise 45% to $2.3 billion and second-quarter revenue to increase 50.3% to $2.5 billion. For the full year, revenue is projected to grow 50% to $10.6 billion, followed by $14.7 billion next year. Actual results could exceed those estimates if demand stays elevated.
Valuation gap versus Lumentum
Coherent trades at a notable discount to its optical peer. Its forward price-to-earnings ratio sits at 32, well below Lumentum's 48, while its forward EV/EBITDA of 21.6 compares with 32 for Lumentum. That spread may attract investors looking for exposure to the same end markets at a lower multiple.
Wall Street analysts remain broadly constructive on the shares. Rosenblatt Securities sees the stock reaching $500, while Deutsche Bank, Stifel Nicolaus, Raymond James, Needham, and Jefferies have targets above $400.
Technical setup points higher
On the daily chart, COHR has been under pressure in recent days but has edged above its 100-day Exponential Moving Average. The stock has carved out an inverted head-and-shoulders pattern, a formation that technical analysts often treat as a bullish reversal signal. The Supertrend indicator has also stayed in positive territory.
Should the pattern resolve to the upside in the coming weeks, the next significant target sits near $440, representing a gain of about 41% from current levels. A failure to hold the 100-day EMA would weaken that setup.
This article is for informational purposes only and does not constitute financial advice.
