Analysts see AI driving Coherent, Inc. bull case

Coherent, Inc. (NYSE:) shares jumped at the start of Tuesday’s session after positive comments from JPMorgan added to Needham & Company almost doubling its price target for the stock.

JPMorgan analysts told investors in a note that artificial intelligence (AI) is primarily driving the bull case for the Overweight-rated company.

“We believe the primary driver is the expectation of an accelerated AI investment cycle, which will benefit Coherent -an opportunity that has come into the spotlight more recently,” wrote the analysts. “In relation to the AI-led investment driver alone, we see a near-term bull case valuation in the $65-$70 range even with near-term upsides in the form of meeting consensus FY25 (Jun-end) expectations only six months earlier in CY24, and north of $100 in the long-term (e.g., five years) supported by bull-case revenues in the $8 bn+ range and EPS of 2x FY25 consensus.”

Needham & Company analysts lifted the price target on Buy-rated Coherent to $64 from $33 per share.

They said that AI is unlikely to provide instant gratification but will likely join the list of long-term drivers for the business.

“Investors anticipate a rapid recovery in the networking business, driven in part by expectations around AI. In the near term, we perceive a challenging outlook for the networking business, but by F24 2H and F25, we expect it to be back on a growth path,” wrote the analysts. “Meanwhile, we believe other secular long-term drivers resulting from the combined legacy II-VI and Coherent business in areas like EV-battery manufacturing, along with the EV catalyst in the SiC business, are intact.”