Coherent Corp (COHR) Stock Forecast & Price Target

Coherent is favored because its six-inch indium-phosphide expansion is the key bottleneck-breaking driver behind a broader AI optical ramp, enabling more qualified lasers, photodiodes, and transceiver shipments at lower device cost. Management has targeted a doubling of internal InP capacity by the September quarter and more than another doubling by the end of CY27, while the latest quarter delivered $2.046B of revenue and $1.74 of adjusted EPS, with Data Center and Communications generating $1.615B. The outlook is further strengthened by PhotonLink, more than ten CPO and NPO engagements each, and forecast FY27/FY28 revenue of $10.629B/$14.422B with gross margin around 40.6%/40.8% and operating margin reaching 23.6%/25.3%.

Coherent is facing a fundamental mismatch between growth spending and cash generation, with FY26 operating cash flow of $79.5M overwhelmed by $1.103B of capex and $1.023B of negative free cash flow, while inventory rose 79.5% to $2.581B and days of inventory reached about 212. Its dependence on scarce externally produced InP wafers, plus $11.8B of future vendor commitments and $22.3M of prepayments under the AXT agreement, heightens execution, supply, and working-capital risk if qualification or customer ramps slip. The outlook is further pressured by rising customer concentration, ongoing stock-based dilution, unresolved regulatory exposure, and visible competition in AI interconnects that could cap pricing power and delay cash returns.