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Coherent’s AI Optics Thesis Is Stronger, but Cash Conversion Resets the Rating

Writer: Antonia Njeru
Antonia Njeru
21 hours ago
7 min read

Present target $350

Reference price $303.00

 Expected return +15.5%

 Summary

  • I downgrade Coherent from Strong Buy to Buy. The business case is stronger, but 15.5% expected upside and poor cash conversion no longer justify the top rating.


  • Fiscal Q4 revenue reached $2.05Bn, up 34% Y/Y, while non-GAAP EPS rose 74% to $1.74. Datacenter & Communications revenue grew 59% year over year.


  • My thesis has changed. AI optics demand and margin expansion strengthened, but the prior near-term cash-flow claim broke as FY2026 free cash flow fell to approximately negative $1.02Bn.

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Glowing AI graphic with the letters AI in a transparent cylinder, circuit lines flowing through it on a black background.
Source; IDMxS

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