On Wednesday, Coherent , Inc. (NYSE:), a company specializing in laser technologies, received a positive outlook from Jefferies, as the firm initiated coverage with a Buy rating and a price target set at $135.00.
The optimistic stance is influenced by the arrival of new CEO Jim Anderson, whose successful tenure at Lattice (OTC:) is expected to translate into significant value creation for Coherent. According to InvestingPro data, the stock has shown remarkable momentum, delivering a 172% return over the past year and currently trading near its 52-week high of $111.66.
According to Jefferies, Coherent has historically struggled with inefficiencies, a byproduct of numerous mergers and acquisitions, which left the company with a complex web of systems and facilities. Despite nearly $500 million invested in restructuring following the merger with II-VI Incorporated, the anticipated financial improvements have yet to materialize.
The company’s current financial position shows a healthy current ratio of 2.67, with liquid assets exceeding short-term obligations, though InvestingPro analysis indicates the stock may be trading above its Fair Value.
The analyst from Jefferies foresees potential earnings per share (EPS) growth for Coherent under Anderson’s leadership. This aligns with InvestingPro data showing six analysts revising their earnings estimates upward, with forecasts suggesting profitability this year despite current challenges. The key areas of focus include divesting underperforming segments, discontinuing unproductive research and development projects, outsourcing manufacturing when beneficial, optimizing product pricing strategies, and enhancing overall business efficiency.
The coverage initiation and positive rating come at a time when Coherent is navigating through post-merger challenges. The strategic changes recommended by Jefferies are expected to streamline operations and strengthen Coherent’s financial position in the competitive laser technology market, where the company currently maintains annual revenues of $5 billion and an EBITDA of $800 million.
In other recent news, Coherent Corp. has been active in multiple fronts, from corporate governance to financial performance. The company’s shareholders approved an amended incentive plan and elected Class One Directors at the recent Annual Meeting. James R. Anderson, Michael L. Dreyer, Stephen Pagliuca, Elizabeth A. Patrick, and Howard H. Xia will serve as directors until the 2027 annual meeting or until successors are elected and qualified.
In terms of financial performance, Coherent Corp. reported its first-quarter results for fiscal year 2025 and shared its projections for the second quarter. While no specific financial misses were mentioned, potential risks that could cause actual results to differ from projections were acknowledged.
On the analyst front, Citi has upgraded Coherent Corp. to a Buy with a new price target of $136.00, reflecting a positive view of the company’s future financial performance. Citi’s analysis anticipates that Coherent will evolve into a company with over 40% non-GAAP gross margin and an earnings power exceeding $5.00 per share by the fiscal year ending in June 2026.
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