Research · Initiation · 2 November 2026
Coherent NYSE: COHR
Coherent is paid every time the optical plug is bought again. At US$210, the shares pay for this year's speed step and none after it.
The call LONG
- Price at publication
- US$210.32close, 30 October 2026
- Target
- US$275.00+30.8% · 12 months, to October 2027
- Conviction
- Low
What proves it wrongCoherent's non-GAAP gross margin falls below 39 per cent in any quarter to June 2027, which would say it is buying volume with price; or fiscal 2027 revenue lands below US$9.5 billion; or, before October 2027, an Nvidia DGX SuperPOD reference architecture makes a co-packaged switch the default for the compute fabric, which would break the claim the call rests on.
Read the full notePDF, 6 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves
The call in brief
- Coherent builds the optical plugs, or transceivers, that link the racks of an AI cluster, and grows the indium phosphide lasers inside them. Its Datacenter and Communications segment grew 40 per cent to US$5.27 billion in fiscal 2026, driven primarily by transceivers, and was 79 per cent of revenue in the June quarter.
- It is paid at every speed step: 800 gigabit plugs still grow, the 1.6 terabit ramp has pulled in, and 3.2 terabit parts are in development. Laser output is the limit, and Coherent says it will double by the end of 2026 and more than double again by the end of 2027.
- Co-packaged optics matters more to Coherent than to a pure laser maker: where it wins, the plug goes and only the laser and engine stay. Coherent sells both, expects first co-packaged revenue this quarter, and Nvidia's newest blueprints still pick the plug.
- At US$210.32 the shares are 51 per cent below their June record and 18 per cent below the US$256.80 Nvidia paid in March. At my 22 times multiple, the price needs fiscal 2028 earnings of US$9.56, no growth on my fiscal 2027 estimate.
- My call: long, target US$275, low conviction. Twenty-two times my fiscal 2028 EPS of US$12.53 gives US$276, 31 per cent above the price, within a range of US$105 to US$426. Results on 4 November come first.