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Investment firm Barclays upgraded Coherent (NYSE:COHR) and downgraded Lumentum (NASDAQ:LITE) on Wednesday, citing varying outlooks for the semiconductor companies.
Analysts Tom O’Malley and Blayne Curtis moved the firm’s ratings on Coherent (COHR) to equal-weight, noting that the “bear case has played out.” Conversely, they lowered Lumentum (LITE) to underweight, citing the fact that the stock is “expensive” with no catalysts coming and worries about a telecom inventory overhang.
Delving deeper into Coherent (COHR), the analysts noted that the stock has gained 30% since the middle of May, due in large part to the link to artificial intelligence. The analysts added that the short case had ended after roughly two years and the restructuring and potential strategic action on its silicon carbide business were positives.
For Lumentum (LITE), the analysts said the company has likely no reason to outperform through the end of 2024, with telecom estimates seen as “too robust” and there is “material” inventory still left.
“We are also downgrading LITE to UW as the stock has minimal exposure to the AI ramp (DC lasers only $20M a qtr and peaked at ~$50M) and now trades at 18x CY24E numbers that we think need to further reset (we are nearly $1.00 below consensus),” the analysts wrote.
Coherent (COHR) shares were fractionally higher in pre-market trading on Wednesday, while Lumentum (LITE) fell nearly 4.9%.
Analysts are largely cautious on Coherent (COHR). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates COHR a HOLD.
