Coherent Soars 112% in 6 Months: Buy, Sell or Hold the Stock?

Coherent Corp.'s COHR stock price has increased a whopping 111.7% in the past six months, outperforming the industry's 13.8% growth and the Zacks S&P 500 Composite’s 13.6% rise.6-Month Share Price Performance Image Source: Zacks Investment Research Let us analyze this stock to find out whether you should ride the rally or stay away from it.COHR’s Product Portfolio: Ultimate AI StackDuring first-quarter fiscal 2026 earnings call, management expressed that Coherent’s products experience high demand due to direct bookings. Per the CEO, 800G was broadly adopted, with 1.6T transceivers experiencing rapid acceptance. This demand compelled the CEO to expect demand for these products to surge exponentially in 2026.Coherent’s Indium Phosphide (InP) product ramped up with higher yields registered in 6-inch InP than in 3-inch ones. It shows that the production team has gained experience over the past five years in manufacturing 2 billion VSCEL devices on its 6-inch arsenide technology. Banking on the rising demand for AI datacenters, the company decided to start production of 6-inch InP in Jarfalla, Sweden.Optical Circuit Switch is another product manufactured by the company that is essential for AI datacenters. Per management, this product adds more than $2 billion in addressable market opportunity in the long run. Per a report by Grand View Research, the global AI market is valued at $390.9 billion, anticipated to see a CAGR 30.6% through 2033. This expanding market provides ample opportunity for COHR’s products to capture a fair share of the market pie.Coherent’s Balance Sheet Position RobustAs of September 2025, COHRheld $875 million in cash reserves, significantly higher than its current debt amounting to $48 million. This cash chest provides safety and flexibility, suggesting easy coverage of short-term obligations. In the first quarter of fiscal 2026, COHR’s current ratio was 2.33, up 6.4% from the previous quarter, surpassing the industry average of 1.58. It solidifies the company’s liquidity position. Image Source: Zacks Investment Research COHR’s Top & Bottom-Line Outlook StrongThe Zacks Consensus Estimate for Coherent’s revenues for fiscal 2026 is pinned at $6.7 billion, indicating 15.1% year-over-year rise. For fiscal 2027, the top line is expected to gain 14.5% from the year-ago quarter. The consensus mark for fiscal 2026 EPS is set at $5.1, indicating 44.5% year-over-year growth. For fiscal 2027, the bottom is anticipated to rise 24.6%.Over the past 60 days, eight and six EPS estimates for fiscal 2026 and 2027 have been revised upward, respectively, without downward adjustment. In the same period, the Zacks Consensus Estimate for fiscal 2026 earnings has increased 11.1%, and that for fiscal 2027 has risen 4.8%, highlighting analyst confidence.Coherent Appears ExpensiveCOHR is priced at 32.42 times forward 12-month earnings per share, higher than the industry average of 25.32 times. Similarly, the company’s trailing 12-month EV-to-EBITDA ratio is 24.07 times, trading at a premium compared with the industry average of 17.81 times. These metrics validate Coherent’s overvaluation, a red flag for investors. Image Source: Zacks Investment Research COHR Faces Fierce Competition in SiC SectorWolfspeed WOLF and ON Semiconductor ON are companies that pose a serious threat to Coherent in the Silicon Carbide (SiC) sector. Wolfspeed holds 12% market share in SiC, according to a report by Future Market Insights. Metal-oxide-semiconductor field-effect transistor (MOSFET), which is the leading segment in 2025, holding 32.5% of the market share, is led by ON Semiconductor with its high-performance devices for powering electronics in electric vehicles.Although COHR is an essential player within the SiC sector, it witnessed a dip in end-market demand, losing 6% year over year in its Material segment’s revenues in fiscal 2025. To up its game, Coherent needs to invest heavily, ensuring it can secure a significant competitive edge over Wolfspeed and ON Semiconductor. However, it can create growth and profitability imbalances.Hold Coherent Stock NowWe recommend investors hold on to the COHR stock for now, as its strong fundamental growth is challenged by overvaluation and fierce competition. While the company’s product portfolio is experiencing high demand with the AI growth, the stock rally over the past year has pushed its valuation over its industry average. COHR’s overvaluation leaves little margin for error. Coherent holds a strong liquidity position.However, it faces stiff competition from Wolfspeed and ON Semiconductor, which might topple its ability to balance profit and growth.COHR currently has a Zacks Rank of #3 (Hold). 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(COHR): Free Stock Analysis Report ON Semiconductor Corporation (ON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks