Coherent Corp.'s COHR stock price has skyrocketed over the past year. The stock has gained 37.3% compared with the industry's 31.2% rise and the 9.2% gain of the Zacks S&P 500 Composite.

COHR’s industry peers, Crane NXT, Co. CXT and Jamf JAMF have declined over the past year. Shares of CXT and JAMF have lost 7.91% and 33.6%, respectively, in the same time frame.

One-Year Price PerformanceZacks Investment Research

Image Source: Zacks Investment Research

Coherent has outperformed Crane NXT, Jamf, and the industry in the past month. COHR has gained 38.5%, outpacing its industry’s 22.3% rise. Crane NXT and Jamf have increased 21.4% and 6.6%, respectively.

One-Month Price PerformanceZacks Investment Research

Image Source: Zacks Investment Research

The significant rise in COHR stock is appealing to investors. The question of whether they should ride the rally or exit their position needs to be answered. Let’s analyze this further to arrive at a conclusion.

Geopolitical Risks and Potential Tariffs Pose Threat to COHR

Coherent is a global company and relies on international supply chains for materials and manufacturing. The lingering geopolitical risk, mainly the tension between the United States and China, could hurt supply chains for materials and manufacturing. The uncertainty prevailing over potential tariffs imposed by either the United States or China could increase COHR’s cost of goods, making it more expensive to manufacture their products.

Hindrances in the supply chain, such as geopolitical risk or tariffs, could be detrimental to Coherent’s ability to procure the necessary components for product manufacturing. This will ultimately result in a reduction of COHR’s capacity to meet consumer demand. We also anticipate that geopolitical uncertainties will affect overall business sentiment, leading to cautious investment behavior from customers and hampering international trade.

The AI leadership battle between the United States and China could introduce technological barricades, disrupting the flow of technology and components required to run Coherent’s business. Management does recognize the apprehensions arising from potential tariff wars as factors that could undermine their optimistic outlook on demand.

Spending Delays by Hyperscalers Could Affect COHR’s Top Line

In the third quarter of fiscal 2025, Coherent registered 24% year-over-year growth in its top line. Robust demand for AI-related data center products fueled this growth. A substantial portion of the company’s datacom segment’s revenues is tied to investments made by hyperscalers. These companies need Coherent’s high-speed optical transceivers to facilitate efficient and swift data transmission for complex AI workloads. Investments made by hyperscalers might not follow a linear progression. Also, the timing of these investments and when COHR recognizes revenues from them can be distorted.

Story Continues

The current turbulent AI market could demotivate hyperscalers from investing in AI infrastructure, leading to a deceleration in COHR’s datacom revenue growth. Investors who had eyes on Coherent and expected strong growth due to the AI boom might be concerned, leading to stock volatility.

Coherent’s Reluctance to Pay Dividends is a Red Flag

Coherent does not have any plan to pay out cash dividends. Hence, the only way to reap the benefits of return on investment on the company’s stock is through share price appreciation. Share price growth is not a guaranteed phenomenon, as evidenced by the fact that its shares have plummeted 22.2% over the past six months and 17.9% in the year-to-date period. Such moves demotivate investors seeking cash dividends, leading to a decline in the purchase of COHR’s shares.

COHR’s Earnings Estimate Revisions

One estimate for fiscal 2025 has been revised downward over the past 60 days, versus one upward revision. The Zacks Consensus Estimate for fiscal 2025 earnings has declined marginally over the same time frame.

For fiscal 2026, one estimate has been revised downward over the past 60 days versus one northward revision. In the same period, the consensus estimate for fiscal 2026 earnings has declined by a slight margin.Zacks Investment Research

Image Source: Zacks Investment Research

Exiting Your COHR Position Seems the Best Option

Coherent’s shares have shown promising growth in recent times, as well as in the past year. Investors who have held COHR for the long run may consider selling their shares now to book their profits, as the company faces challenges stemming from geopolitical risk, potential tariffs, and delays in hyperscaler investments, which are affecting the top line and leading to a decline in stock price. We also recommend potential investors not to invest in Coherent now.

COHR has a Zacks Rank #4 (Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Coherent Corp. (COHR):Free Stock Analysis Report

Jamf Holding Corp. (JAMF):Free Stock Analysis Report

Crane NXT, Co. (CXT):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

View Comments