COHR: Same Price as May, Different Company

This article is for informational and educational purposes only and should not be considered financial advice, investment advice, or a recommendation to buy or sell any security. Readers should do their own research and consider their own risk tolerance before making investment decisions.

If this is your first time reading about Coherent, three things are worth knowing. The company builds the optical hardware that moves data around AI datacenters, and it does the whole stack: laser chips at one end, finished optical modules at the other. The first phase of the AI trade was about a shortage of compute. The next phase is about a shortage of connectivity, and the physical chokepoint in connectivity sits in advanced lasers and indium phosphide (InP) capacity. That is exactly where Coherent sits. In March 2026, NVIDIA put $2 billion into the company alongside multi-billion-dollar purchase commitments. When a customer pays in advance to lock up supply, that tells you more than any earnings call does.

If you read the May piece (linked below), the setup has changed. Back then I argued that anything below $315 was the first zone worth watching, because the market had not yet grasped how long the photonics bottleneck would last. The stock went to $440. Semis pulled back in July. Earnings landed on August 13 and the stock gave up another 6.5%, settling around $325.

The price is roughly back where it started. The market’s understanding of the business is not. What you are buying today is a different trade.

Market and current Consensus Overview:

The market now fully accepts that Coherent will grow quickly for the next two years, and it is refusing to pay a growth multiple for it.

The reason is cash. The company is spending aggressively to build capacity. Net debt climbed from $143 million last quarter to $629 million. Full-year capex ran around $1.1 billion while operating cash flow came in at roughly $80 million. In other words, the growth is believable, but a company still burning cash does not get a premium multiple (and this is consistent with the semi pullback we saw in July).

That is the bet you are taking at this price. Your downside is not protected by earnings. It is protected by whatever multiple the market is willing to assign, and that multiple hinges on when free cash flow turns.

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