One thing we could say about the analysts on Coherent Corp. (NYSE:COHR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the latest consensus from Coherent's 16 analysts is for revenues of US$5.0b in 2024, which would reflect a modest 3.2% improvement in sales compared to the last 12 months. Per-share losses are expected to see a sharp uptick, reaching US$1.32. Before this latest update, the analysts had been forecasting revenues of US$5.8b and earnings per share (EPS) of US$1.49 in 2024. There looks to have been a major change in sentiment regarding Coherent's prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 26% to US$42.50, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Coherent analyst has a price target of US$85.00 per share, while the most pessimistic values it at US$29.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Coherent's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Coherent's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.6% growth on an annualised basis. This is compared to a historical growth rate of 28% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.9% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Coherent.
The Bottom Line
The biggest low-light for us was that the forecasts for Coherent dropped from profits to a loss next year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Coherent's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Coherent.
There might be good reason for analyst bearishness towards Coherent, like recent substantial insider selling. For more information, you can click here to discover this and the 2 other risks we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here