Coherent: I'm Completely Unfazed (Upgrade)

Coherent is upgraded to a strong buy as accelerating growth, robust demand, and capacity scaling drive a compelling risk/reward profile. The company delivered 34% YoY revenue growth in Q4, beat consensus, and guided for further acceleration with Q1 revenue expected to grow ~46% YoY. Margins are expanding: Q4 gross margin reached 40.2%, and operating margin improved by 381 bps, reflecting pricing power and operational efficiency. Valuation has sharply contracted—forward P/E now 28.33 and PEG at 0.62—while regulatory catalysts and AI-driven demand reinforce the bullish thesis.

Introduction A few months ago, I initiated coverage on Coherent Corp. (COHR) amid the boom in the optical connectivity space. Growth acceleration was evident, and the long-term opportunity was significant as AI data center demand