Coherent Inc. (NYSE: COHR) stock has been trading at $70 per share, 30% below its peak level of $100 in February 2021, compared to a 15% decline in Lattice Semiconductor (NASDAQ: LSCC) stock. Following a rise to $71 in early June 2022, just before the Fed began raising rates, COHR stock is now close to that level, while the S&P 500 gained 40% during this period. Under new CEO Jim Anderson, who previously led Lattice Semiconductor, COHR stock rose 22% on June 3, 2022, after Lattice saw its stock surge 12x in the last six years, garnering investor approval for the change in leadership.
The performance of COHR stock relative to the index over the past three years has been lackluster, with returns of -10% in 2021, -49% in 2022, and 24% in 2023. In contrast, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating COHR underperformed the index in 2021 and 2022. The Trefis High Quality Portfolio, however, has consistently outperformed the S&P 500 each year over the same period. The current average price estimate for COHR stock is $68, suggesting it may be fully valued after its recent surge.
During the 2022 inflation shock, COHR stock and the broader market faced challenges due to high oil prices and elevated interest rates. The Fed’s aggressive rate hikes following the peak inflation level of 9% in June 2022 led to market fluctuations, with the S&P 500 experiencing a sharp decline. However, the Fed’s efforts to stabilize the situation may offer COHR stock the potential for further gains once recession fears are alleviated. Despite the positive impact of the change in leadership, lingering concerns about high debt levels remain for the company.
Analyzing COHR’s performance during the 2007-2008 financial crisis, the stock declined from $18 in September 2007 to $9 in March 2009 before recovering to $16 in early 2010. In comparison, the S&P 500 index fell 51% during the crisis but rebounded by 48% after bottoming out. Coherent’s fundamentals have shown growth in revenue from $2.4 billion in 2020 to $5.2 billion in 2023, driven by the laser business. Despite a surge in total debt to $4.5 billion, the company has increased its cash reserves and generated cash flows from operations in 2023.
With the Fed’s interventions targeting inflation rates and improving market sentiments, COHR stock could see further gains once recession fears subside. While the change in leadership has boosted investor confidence, it is unlikely that COHR stock will reach its 2021 levels in the near future. High debt levels pose a near-term concern, but the company should be able to meet its obligations. Overall, COHR stock has the potential for growth in the post-inflation shock market environment, considering its solid revenue growth and operational performance despite challenges.
