AI And Industrial Markets To Propel Coherent In Long-Term Recovery, Says Analyst

Needham analyst Jim Ricchiuti reiterated a Buy rating on the shares of Coherent Corp. COHR, nearly doubling the price target to $64 from $33.

The analyst remains remarkably upbeat about Coherent's core technologies, those developed internally and those acquired, as these are the company's key strengths.

The company will gain from the long-term recovery of network business and continued strength in the industrial markets, which will be boosted by AI, the analyst notes.

While the analyst does not see an improvement in the networking business over the near term, a pickup in the pace of 200G-800G deployments, some of which may be AI-related, should benefit COHR's datacom business in the F2H'24.

The analyst adds that Coherent is seeing a sharp recovery in the shares over the past month following the FQ3 selloff, as investors anticipate a rapid recovery in the networking business.

Coherent will boost growth, particularly in areas like EV-battery manufacturing and the EV catalyst in the SiC business.

Ricchiuti also highlights Coherent's recent MOU with Mitsubishi Electric Corp MIELF in late May, under which COHR will support Mitsubishi's 200mm SiC manufacturing process as a tailwind. Mitsubishi is investing ~$2 billion in a new facility to produce SiC power devices based on 200 mm technology.

Also Read: Analyst Expectations for Coherent's Future

Coherent's September 2019 acquisition of Finisar has transformed the company into "the largest optical communications component and laser and photonics company in the world," the analyst notes.

Price Action: COHR shares are trading higher by 0.49% to $55.14 on the last check Tuesday.