Coherent Corp. (COHR) shares have climbed 171.2% in the last six months as demand for its optical components used in AI infrastructure surges, significantly outpacing competitors and raising questions about its high valuation.
"This growth is attributed to a rising demand for transceivers and Optical Circuit Switch Systems," James Anderson, the company's CEO, said in a recent statement, highlighting the components' critical role in building out AI data centers.
The company's Datacenter & Communications segment, which now accounts for 75% of its top line, saw revenues grow more than 40% year-over-year in the third quarter of fiscal 2026. Coherent reported quarterly earnings of $1.41 per share on revenue of $1.81 billion, surpassing analyst estimates. The stock's 171.2% rise contrasts sharply with the industry's 1.4% dip and the S&P 500's 12.3% rally over the same period.
The performance puts Coherent at a crossroads for investors. The company's strong fundamentals are pitted against a valuation that is significantly higher than its peers, while active traders now have a new, high-risk tool to bet on its daily moves with the launch of a leveraged ETF.
Coherent's primary growth driver is the insatiable demand for data transmission capacity in AI training and inference clusters. The Datacenter & Communications segment's explosive growth, up from 72% of revenue in the prior quarter, reflects the company's central position in the AI supply chain. While competitors like Wolfspeed (WOLF) and ON Semiconductor (ON) have seen gains of 75.9% and 134.3% respectively over the past year, Coherent's 381.2% surge in the same period demonstrates a stronger market capture of the AI trend.
While the company's industrial segment remains soft, Coherent noted that bookings in semiconductor capital equipment have surged, signaling a potential rebound. The company's balance sheet has also strengthened, ending the third quarter with $2.5 billion in cash reserves against only $9 million in current debt.
Despite the strong performance, the stock's valuation is a point of concern. Coherent is priced at 52.58 times forward 12-month earnings, more than double the industry average of 22.85 times. Its EV-to-EBITDA ratio of 51.2 also trades at a premium to the industry's 17.19.
This rich valuation leaves little room for error. The company does not pay a dividend, meaning returns are entirely dependent on share price appreciation. For current investors, analysts suggest holding the stock to capitalize on its momentum. For potential buyers, however, the recommendation is to wait for a pullback to find a more attractive entry point.
Reflecting the increased interest in the stock, Leverage Shares by Themes recently launched the Leverage Shares 2X Long COHR Daily ETF (COHH). This product is designed to deliver 200% of the daily performance of Coherent's stock, offering sophisticated traders a capital-efficient way to magnify their bets on the stock's daily movements.
However, the issuer warns that these are high-risk products meant for active traders. Due to daily rebalancing, the fund's returns over longer periods can diverge significantly from 200% of the stock's performance and can lose money even if the underlying stock goes up.
This article is for informational purposes only and does not constitute investment advice.
