Coherent stock dips as Rosenblatt downgrades after AI-driven rally
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Update: The article was updated to include rating action by Northland Capital Markets
Rosenblatt Securities downgraded Coherent (NYSE:COHR) to Neutral from Buy and raised its price target on the shares to $55 from $41.
The firm's analysts said Coherent's stock has risen ~80% in the past one month on the thesis that AI will drive massive growth in 800G and above Datacom Optical modules, resulting in a shorter than expected inventory correction and better FY24 figures.
The firm noted that investors are looking for AI beneficiaries, but it thinks that the bull thesis and stock are ahead of themselves.
The analysts noted that AI Pods are currently predominately closed with most equipment, including networking, supplied by chip makers such as Nvidia (NVDA) and Marvell Technology (MRVL).
The firm thinks Coherent will benefit from AI when the pods open and Ethernet is more widely deployed beginning in the second half of CY 2024. But in the near-term, the analysts are concerned about further shoes to drop in Networking â mainly due to high Telecom inventories â and Lasers due to macro and competition.
Northland Capital Markets'
Rating:
Northland analysts said they were downgrading Coherent's shares to Market Perform following the recent strong move in the stock that narrowed the valuation gap with competitor Lumentum (LITE), which the firm has noted previously.
The firm said that Coherent is one of several names in its universe with exposure to increased data center spending steered by AI/ML workloads, all of which have seen significant stock price upside.
The analysts think that current price levels more than reflect that upside, though the increase the firm's price target reflect multiple expansion across the space. These moves come despite recent deep estimate cuts at both Lumentum and Coherent, driven in part by customer inventory digestion among Cloud customers.
COHR -5.62% to $52.20 premarket June 21
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