Analyst boosts Coherent and Lumentum stock targets amid improving optics sector
- J.P. Morgan analyst Samik Chatterjee sees a favorable outlook for Coherent Corp and Lumentum Holdings as the optics sector overcomes previous challenges.
- Concerns around co-packaged optics disruption and pricing pressures have eased, leading to improved projections for the companies in fiscal years 2026 and 2027.
- Chatterjee raised price forecasts for both companies, showing increased confidence in their growth potential.
In recent developments in the optics sector, J.P. Morgan analyst Samik Chatterjee expressed a more optimistic outlook for Coherent Corporation and Lumentum Holdings Inc. This shift comes after the companies successfully managed the challenges that have plagued the sector, including concerns regarding co-packaged optics disruption, pricing pressures, and technology transitions. These factors have also included fears over tariffs that had cast doubts on future growth potential. Chatterjee's analysis indicates that demand has strengthened, and he expects a notable performance improvement for optics companies in the second half of 2025. Specifically, he has increased the target multiple for Coherent to 22x and revised its December 2025 price forecast to $100, up from $86. Chatterjee's confidence in Coherent stems from the company's adept handling of CPO disruptions and the robustness of its extensive product lineup. Chatterjee has projected that Coherent will achieve a revenue growth rate of 10% for the fiscal years 2026 and 2027, anticipating gross margins of approximately 39% and 40%, respectively. The earnings per share (EPS) estimates are now set at $4.50 for fiscal year 2026 and $5.70 for fiscal year 2027, surpassing consensus estimates by about 4% for the latter year. For Lumentum, the analyst has similarly raised his target multiple to 20x and revised the price forecast for the same period to $100 from $87. Chatterjee cited a surge in demand for telecommunications data center interconnects (DCI) and a rapid ramp in Datacom capabilities, particularly through the Cloudlight technology offering. The improved revenue outlook for Lumentum now includes a projection of reaching $600 million in quarterly revenue by the fourth quarter of fiscal 2026. Moreover, Lumentum recently upgraded its revenue guidance for the fourth quarter to between $465 million and $475 million, indicating a robust performance driven by operational efficiencies. Analysts across Wall Street have reacted positively to the news, aligning price targets that reflect heightened confidence in Lumentum's stock performance.