Coherent is a stock you should own, this investor says
SPEAR Invest founder and chief investment officer Ivana Delevska said Coherent (Coherent Stock Quote, Chart, News, Analysts, Financials NYSE:COHR) stands out as a preferred way to gain exposure to optical networking, citing an emerging inflection point in data centre demand and what she views as a more attractive valuation relative to peers.
Speaking on BNN Bloomberg’s Market Call on Jan. 28, Delevska said optical components are becoming increasingly critical as data traffic scales both between and within data centres.
“Coherent provides networking components specifically focused on optics. This is basically how all data is getting transmitted outside of the data centres and also within chips,” she said. “We are seeing an inflection point that started midway through last year for the optical stocks.”
She noted the sector had come through a downcycle driven by softer telecom spending, but said adoption is now broadening materially as hyperscalers and cloud providers ramp investment.
“Now they’re starting to gain very broad adoption in data centres, and that’s basically why we’re excited about it,” Delevska added.
While she acknowledged other optical names in the space, including Lumentum and Ciena, Delevska said valuation discipline remains key to SPEAR Invest’s positioning.
“We like Coherent much more on a valuation basis,” she said, adding that while the firm owns Ciena, it does not currently hold Lumentum. “They just don’t screen as attractively. Lumentum, in our view, is a little bit ahead of itself.”
Coherent is a global supplier of engineered materials, optoelectronic components, and laser systems, with products spanning optical networking, industrial, and semiconductor end markets.
Coherent shares have gained 166.3% over the past 12 months and 157.2% over the past five years. Of the analysts covering the stock, 17 rate it “Buy,” six rate it “Hold,” and none rate it “Sell,” with a consensus price target of US$199.38.
The shares closed January 29 at US$215.78.
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Rod Weatherbie
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Rod Weatherbie is a journalist based in Prince Edward Island. Since 2004, he has written extensively about the Canadian property and casualty insurance landscape. He was also a founder and contributing editor for a Toronto-based arts website and a PEI-based food magazine. His fiction and poetry have been featured in The Fiddlehead, The Antigonish Review, and Juniper.