Coherent (COHR) Surges 7.7% on Strategic Divestiture and Analyst Optimism – What’s Next for the Photonics Giant?

Summary
• Coherent (COHR) rockets 7.7% to $165.93, hitting a 52-week high of $166.81
• $400M sale of Aerospace & Defense business to Advent sparks EPS optimism
• Analysts split between 'Outperform' upgrades and 'Hold' caution amid AI sector volatility

Coherent’s stock is surging on a pivotal strategic shift and mixed analyst commentary. The $400M divestiture of its Aerospace & Defense unit, coupled with upbeat guidance for AI-driven datacenter growth, has ignited a 7.7% rally. However, recent analyst downgrades and sector-wide jitters over valuation corrections add complexity to the bullish momentum.

Strategic Divestiture Fuels Optimism Amid AI-Driven Growth Hopes
Coherent’s 7.7% intraday surge stems from its $400M sale of the Aerospace & Defense business to Advent, a move management calls 'strategically accretive.' The transaction, expected to close in Q3 2025, will reduce debt and free resources for core photonics growth. CEO Jim Anderson emphasized focusing on 'core markets like datacenters and industrial lasers,' aligning with AI infrastructure demand. Analysts at KGI and Northland reaffirmed 'Outperform' ratings, citing long-term potential in laser innovation and datacenter expansion, while BofA and others downgraded due to near-term guidance concerns.

Optical Equipment Sector Volatile as Coherent Outpaces Peers
The optical equipment sector (led by IPG Photonics, up 0.0%) remains fragmented. Coherent’s 7.7% gain contrasts with mixed Q3 results across peers, where 10 stocks averaged a 1.7% decline post-earnings. While Coherent’s AI/datacenter focus aligns with sector tailwinds, its recent volatility—47 moves >5% in 12 months—reflects divergent investor sentiment. The sale of its defense unit, a historically stable segment, raises questions about long-term growth sustainability compared to peers like Amphenol (up 12% YTD).

Options Playbook: Leveraged Calls and Gamma-Driven Bets in a Volatile Move
• MACD: 5.85 (Signal: 6.36, Histogram: -0.51) – bearish divergence
• RSI: 46.77 – neutral territory
• Bollinger Bands: Upper $166.36, Middle $144.22, Lower $122.09 – price near upper band
• 200D MA: $93.22 (far below current price)

Coherent’s price action suggests a short-term bullish trend, with key resistance at $168.57 (52-week high) and support at $156.28 (intraday low). The 46.77 RSI and 5.85 MACD signal a potential pullback, but the 7.7% move has pushed the stock into overbought territory. For leveraged exposure, consider COHR20251205C165 and COHR20251205C170, which balance liquidity and gamma sensitivity.

• COHR20251205C165
- Strike: $165, Expiry: 2025-12-05
- IV: 65.04% (mid-range), Leverage: 25.78% (high), Delta: 0.5226 (moderate), Theta: -0.7946 (high decay), Gamma: 0.0251 (high sensitivity)
- Payoff at 5% upside: $165.93 → $174.23 → max(0, 174.23 - 165) = $9.23 gain
- Why it stands out: High gamma and leverage amplify returns if the stock breaks above $165, while moderate delta ensures directional sensitivity.

• COHR20251205C170
- Strike: $170, Expiry: 2025-12-05
- IV: 68.13% (high), Leverage: 36.02% (very high), Delta: 0.4061 (moderate), Theta: -0.7155 (high decay), Gamma: 0.0233 (high sensitivity)
- Payoff at 5% upside: $165.93 → $174.23 → max(0, 174.23 - 170) = $4.23 gain
- Why it stands out: Aggressive leverage and gamma make this ideal for a breakout above $170, though higher IV implies volatility risk.

Action: Aggressive bulls may consider COHR20251205C165 into a test of $168.57 (52-week high). If $170 breaks, COHR20251205C170 offers high-reward potential.

Backtest Coherent Stock Performance
Below is the event-study back-test you requested, visualised via the built-in Event Backtest module.Key take-aways (30-day horizon):• Total events detected: 25 • Average next-day return: +0.21 % (not significant) • Worst window: Day 5 (-3.02 %, statistically significant negative) • Returns remain below benchmark until ≈ Day 15; thereafter modest catch-up but no statistically significant out-performance by Day 30. • Implication: For COHR, chasing +8 % intraday spikes has not delivered reliable short-term alpha in 2022-2025; a brief pull-back within the first trading week is more common.Feel free to explore the interactive chart for full cumulative P&L, hit ratios and distribution details.

Coherent’s Strategic Shift and AI Momentum: A High-Volatility Play for the Bold
Coherent’s 7.7% surge hinges on its strategic divestiture and AI-driven growth narrative, but near-term volatility remains elevated. The stock’s proximity to its 52-week high ($168.57) and mixed analyst ratings suggest a pivotal juncture. Investors should monitor the $165 support level and watch for follow-through volume above $168.57 to confirm a breakout. Meanwhile, sector leader IPG (up 0.0%) offers a benchmark for broader optical equipment trends. For those willing to navigate the volatility, leveraged calls like COHR20251205C165 present a compelling case if the stock sustains above $165. Watch for $168.57 clearance or a breakdown below $156.28 to dictate next steps.