Shares of Coherent Corp surged more than 7% during Monday's trading session, propelled by a significant price target increase from Bank of America. The stock closed at $244.13, marking a 7.2% gain for the day, after trading in a range between $219.69 and $247.06. This notable movement follows a period of considerable volatility after the company's recent earnings report, as market participants continue to assess the outlook for artificial intelligence-related infrastructure spending and await key U.S. economic data.
Analyst Action and Market Context
Bank of America raised its price target on Coherent to $250, up from $230, while maintaining a Neutral rating on the shares. According to the firm's research note, this adjustment reflects heightened expectations for capital expenditures by hyperscale cloud providers. The bank reported that global hyperscale capital expenditures reached $148 billion in the fourth quarter and projected even higher spending levels for 2026 and 2027. This analyst move has drawn investor attention to Coherent's positioning as a potential high-beta proxy for AI data center investment, a sector known for rapid shifts in both demand and market sentiment.
The broader optical and networking equipment sector participated in the rally. Lumentum shares advanced 4.8%, Ciena gained 8.1%, and Applied Optoelectronics jumped 8.2%. Major equity indices also moved higher, with the S&P 500 ETF rising 0.7% and the Nasdaq-100 tracker climbing approximately 1.0%.
Earnings Volatility and Forward Guidance
Coherent's stock has experienced a turbulent path following its fiscal second-quarter results. The shares declined roughly 7.9% on February 4, slid further on February 5, then rebounded with an 8.8% surge on Friday. Monday's advance pushed the stock well above its pre-earnings level.
For its fiscal second quarter, Coherent reported revenue of $1.686 billion and non-GAAP earnings of $1.29 per share. Looking ahead, management provided third-quarter guidance projecting revenue between $1.70 billion and $1.84 billion. The company expects non-GAAP earnings per share in the range of $1.28 to $1.48 and sees non-GAAP gross margin between 38.5% and 40.5%. These non-GAAP figures exclude items the company does not consider part of its core operational performance.
On the earnings call, CEO Jim Anderson cited robust demand across datacenter and communications markets as the primary driver for the December-quarter performance and expressed expectations for continued strong growth through fiscal 2027. CFO Sherri Luther noted the company is increasing its capital investments to expand production capacity.
Investor Scrutiny and Macroeconomic Hurdles
While the capacity expansion plans are attracting investor interest, they also represent a point of concern. Market participants are seeking concrete evidence that the additional capacity will translate into firm customer orders rather than leading to pricing pressure or compressed gross margins. Coherent's product portfolio, which includes lasers and optical components essential for high-speed data center connections as well as parts for industrial manufacturing, has recently caused the stock to trade with the momentum characteristics of an AI infrastructure play rather than a traditional industrial supplier.
The company also faces specific operational challenges as it ramps up production and manages a business portfolio reshaped by recent divestitures. Furthermore, the broader environment for rate-sensitive technology stocks presents a near-term hurdle. The release of the U.S. January Consumer Price Index data on Friday morning could significantly impact Treasury yields and, consequently, investor sentiment toward high-multiple equities like Coherent if the figures surprise to the upside.
Market dynamics can shift rapidly; a slowdown or deferral of upgrade spending by major cloud operators could leave suppliers with excess inventory and intensified competitive pricing. Investors are thus balancing optimism over long-term AI-driven demand against these cyclical and execution risks as they evaluate Coherent's current valuation and growth trajectory.
