Coherent Corp. shares closed at $377.57 on Friday, a slight decline of 0.1% for the day and roughly 1.3% below the prior week's close. The stock experienced a volatile week, with a sharp drop on Monday followed by a rebound on Thursday as AI-optics names rallied ahead of the long holiday weekend.
U.S. equity markets are closed for Memorial Day on Monday, May 25, making Tuesday the earliest opportunity for investors to resume trading in Coherent and other high-speed networking suppliers. The stock lagged the broader market's upward momentum, with the S&P 500 gaining 0.9% and the Nasdaq rising 0.5% over the week. The overall U.S. market notched its eighth consecutive weekly gain.
Coherent's challenge is not a lack of demand but rather determining how much of that demand is already priced into the stock. The company reported fiscal third-quarter revenue of $1.81 billion, a 21% year-over-year increase, with non-GAAP earnings per share of $1.41. CEO Jim Anderson highlighted "exceptionally strong demand" in datacenter and communications, while CFO Sherri Luther noted the company is "ramping our capital investment" to increase capacity.
During the earnings call, Anderson told analysts that customer demand remains robust with "no signs of attenuation" and that orders are now stretching into 2028. He identified indium phosphide as a "key constraint" and said the company is working to ease this with additional capacity.
Investors are particularly focused on transceivers, the devices that convert electrical signals into light for fiber-optic links. Bank of America Securities raised its price target on Coherent to $400 from $365 this month, maintaining a Neutral rating. The move underscores Coherent's position in 800G and 1.6T transceivers, which are increasingly used in faster AI-driven data-center networks.
Lumentum and Applied Optoelectronics moved in tandem with Coherent within the optical-networking group. All three stocks climbed midweek as AI data-center names rebounded after a Monday selloff triggered by filings showing a major AI investor had exited positions in Coherent and Lumentum.
Nvidia remains a pivotal factor. In its latest quarterly filing, Coherent disclosed that Nvidia invested $2 billion on March 2 and signed a multi-year agreement covering advanced optics, manufacturing, and R&D for next-generation AI infrastructure.
However, risks persist. Coherent trades at approximately 179 times trailing earnings, an elevated price-to-earnings multiple. Any setback in scaling up capacity, softer cloud demand, or squeezed margins in high-speed optical components could pressure the stock. The company also flagged in its latest filing that trade issues could impact revenue, increase material costs, or cause production delays.
With a short trading week ahead, investors will digest consumer confidence data, jobless claims, and an updated first-quarter GDP reading. These economic indicators could set the tone for growth stocks, with all eyes on Coherent ahead of its next corporate update.
