A joint coherent-IIVI business does not receive qualified credit
Consistent Corporation (NYSE: COHRis a leading manufacturer of laser-based technologies used in a variety of industries, including semiconductors, electronics, and healthcare. Investing in Coherent Corporation stock can provide investors with an opportunity To benefit from the growing demand for laser-based technologies in manufacturing, automation and more, leading to the company’s continued success. Coherent Corp recently did Completed its merger with IIVI, another leading manufacturer of laser-based technologies, basically doubling the breadth of their range. A merger creates a larger and more diverse company under one roof with a broader range of products and services (Figure 1). This development is a positive indicator of the company’s future success and gives investors more reasons to consider investing in Coherent Corporation’s stock, even though the stock has only moved lower since completion. Coherence is below ~50% Last year alone is a 52-week low despite deliveries Consistent earnings.
Figure 1. Coherent offers multiple product offerings, all within high-growth areas such as EVs and semiconductors.
Trading at a roughly 35-55% discount to peers, we believe COHR could nearly double and still be relatively fairly priced to the competition. Therefore, taking a conservative timeline and the lower end of these price targets, if macroeconomic conditions improve, Coherent could reach the higher $56-$59 range within the next 1.5-2 years. Keys to success include maintaining their current high growth levels, continuing to deliver on earnings, and paying down their debt load.
Coherent Corporation’s stock is currently trading at a relatively low price-to-earnings (P/E) ratio compared to its industry peers, at just 8.8x trailing earnings, and 9.2x forward earnings. This suggests that the stock is undervalued before the market recognizes the true value of the company and may provide investors with a good opportunity to buy at a lower price. Additionally, the company has a strong balance sheet with a healthy cash position (~$1 billion), which gives the company the flexibility to invest in growth opportunities or return value to shareholders through share buybacks, debt repayments, or dividends. Looking at the growth in relation to the valuation, we see that COHR has a lot thanks to the merger with IIVI and even trading at the lowest valuation can slow market sentiment towards the stock (Figure 2).
Figure 2. COHR trades at a discount despite posting strong revenue and earnings growth, which is expected to continue for the foreseeable future.
Trading below the information technology sector average (~40-60%) for nearly every valuation metric and below their own 5-year valuation average, Coherent appears to be an excellent entry price. As they pay down some of their debt to improve enterprise value in the year ahead, more favorable macroeconomic conditions will drive investors back into technology stocks and COHR could bounce back near 52-week highs. . We give the stock a 60-75% upside over the next 2 years and recommend it as a buy anywhere below the $40 mark.
As we always say, with any investment, there are always risks to consider. Coherent Corp. One of the main risks of investing in is high long-term debt and the possibility of higher rates in the current environment if COHR defaults and requires refinancing. In addition, the Company operates in a highly competitive industry and there is a risk that new technologies may emerge that make Coherent Corporation’s products relatively obsolete. Moreover, the merger with IIVI brings higher diversification, which is an advantage in bear markets, but it can inhibit long-term growth, reducing potential gains in bull markets. Investors should consider these risks carefully before investing in Coherent Corporation’s stock. There appears to be a relatively strong level of support around the low $30 range, meaning downside risk at current prices is around 12-16%.
Despite these aforementioned risks, an investment in Coherent Corporation’s stock may still provide investors with an opportunity to benefit from the growing demand for laser-based technologies and the company’s continued success. We see a roughly 6:1 reward to risk ratio over the next two years on Coherent at current prices. With its strong balance sheet and potential for a merger with IIVI to create a larger and more diversified company, Coherent Corporation is well positioned to continue its success and provide investors with a return on their investment in a strong and ever-growing semiconductor market. . Finally, as always, investors should carefully consider both the risks and opportunities before making any investment decision, but we believe that an investment in Coherent Corporation’s stock may provide investors with a valuable opportunity to benefit from the development of laser-based technology. market (Figure 3).
Figure 3. Coherent is a leader in the laser market, offering better technology than competitors for competitive prices