Shares of semiconductor manufacturer Coherent (NYSE: COHR) fell more than 22% on Thursday after the company’s fiscal fourth-quarter non-GAAP operating margin came in at 18.0%, narrowly missing the FactSet consensus estimate of 18.2%.
The drop came despite the firm posting revenue and earnings per share ahead of market expectations.
For the fiscal first quarter, Coherent guided earnings per share excluding one-time items to a range of $0.93 to $1.13, compared with analysts’ consensus estimate of $1.02 and a broader range of $0.89 to $1.23 according to FactSet data.
Revenue is projected between $1.46 billion and $1.60 billion, bracketing the consensus estimate of $1.55 billion.
Mixed analyst reactions following results
The company’s latest earnings report prompted a range of analyst responses.
BofA Securities downgraded Coherent from Buy to Neutral, while raising its price target to $105 from $92.
The move comes despite the stock delivering a return of more than 70% over the past year.
BofA cited decelerating growth in Coherent’s data centre business as a key concern.
This segment grew 24% year-on-year in the September quarter, a sharp slowdown from the previous three quarters, which saw growth rates of 39%, 46% and 58%.
This moderation contrasts with stronger capital expenditure trends in the artificial intelligence sector and new product launches by AI accelerator vendors.
The bank also pointed to modest gross margin trends, with figures between 38.1% and 38.5% remaining below the 40% level generally viewed as critical for price-to-earnings multiple expansion.
Stifel raised its price target to $118 while maintaining a Buy rating.
Raymond James increased its target to $134 with a Strong Buy rating. Needham reiterated its Buy rating with a $120 target, citing the ongoing strength of Coherent’s data centre segment.
Conversely, Rosenblatt reduced its price target to $135 while keeping a Buy rating, noting the company’s conservative guidance.
While Coherent’s growth story remains intact in several segments, the slowdown in data centre momentum, margin pressures, and strategic headwinds present challenges for sustaining the high valuation multiples the stock has commanded over the past year.
Strategic moves and financial positioning
Despite the downgrade, Coherent maintains robust overall revenue growth of 23.42% and strong liquidity, with a current ratio of 2.19, indicating financial flexibility during its transition period.
However, the company faces headwinds from the sale of its aerospace and defence business, expected to create approximately $170 million in growth challenges for fiscal 2026.
A new Apple contract is only expected to contribute meaningfully from the second half of calendar 2026.
BofA raised its estimates for Coherent’s calendar year 2026 earnings by 5% and 2027 by 12%, primarily due to lower interest expenses.
It also increased its price target multiple from 19x to 21x on 2026 earnings, which supported the revised price objective.
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