Coherent Plummets 20%: What's Behind the Sudden Collapse?

Summary
• Coherent (COHR) tumbles 20.1% intraday to $91.09, its worst single-day drop since April 2025.
• Q4 revenue beats $1.53B vs. $1.51B estimates, but Q1 guidance falls short of $1.55B midpoint.
• $400M sale of Aerospace & Defense unit creates $170M revenue gap in FY2026.

Coherent’s stock implodes on Thursday as a combination of weak guidance, strategic divestitures, and sector headwinds collide. The photonics giant’s earnings beat is overshadowed by a $170M revenue gap from the defense unit sale and tepid datacom demand forecasts. With the stock trading below both 20-day and 50-day moving averages, traders are scrambling to assess the fallout.

Earnings Beat Overshadowed by Weak Guidance and Strategic Shifts
Coherent’s 20% premarket collapse stems from a perfect storm of near-term headwinds. While Q4 revenue ($1.53B) and EPS ($1.00) exceeded estimates, Q1 guidance of $1.46–1.60B fell short of the $1.55B consensus. The $400M sale of its Aerospace & Defense business—a unit contributing $20M in Q1 revenue—exacerbated the shortfall. Bank of America’s downgrade to ‘Neutral’ and revised $105 price target further spooked investors. Despite long-term AI infrastructure tailwinds, near-term datacom margin pressures and the absence of defense revenue have triggered a liquidity crunch.

Communication Equipment Sector Volatility Amid Tech Rebalancing
The Communication Equipment sector (XLC -1.2%) mirrors COHR’s turbulence as tech stocks recalibrate post-earnings. Cisco Systems (CSCO -1.2%) leads sector declines, reflecting broader concerns over AI infrastructure valuations. Coherent’s drop aligns with peers like Lumentum and II-VI, which face similar margin compression in datacom markets. However, COHR’s unique exposure to defense divestitures and Apple partnership delays amplifies its near-term volatility.

Options Playbook: Capitalizing on COHR’s Volatility
• RSI: 71.25 (overbought)
• MACD: 6.10 (bullish divergence)
• 200-day MA: $86.50 (current price at 91.09)
• Bollinger Bands: Lower band at $93.32 (near current price)

COHR’s technicals suggest a bearish reversal after breaking below key support at $90. Traders should monitor the $88.47 gamma flip point, where additional selling pressure could accelerate. For options, COHR20250822P88 (put) and COHR20250822C90 (call) stand out:

• COHR20250822P88: Put option with 49.03% IV, 70.45% leverage ratio, delta -0.284, theta -0.004, gamma 0.048. High leverage and moderate delta position this for gains if COHR breaks below $88.47.
• COHR20250822C90: Call option with 29.59% IV, 34.56% leverage ratio, delta 0.663, theta -0.359, gamma 0.086. Strong gamma and leverage make this ideal for a rebound above $90.

Payoff analysis under 5% downside (to $86.50): Put payoff = $1.59/share; Call payoff = $0.00. Aggressive short-sellers should target the COHR20250822P88 for a 12.15% implied move, while bulls may defend $90 with the COHR20250822C90.

Backtest Coherent Stock Performance
The 20% intraday plunge in COHR has historically led to positive short-to-medium-term gains. The backtest data shows that after such a significant drop, COHR tends to recover and even exceed its original price:1. COHR's Tendency to Recover: - The 3-day win rate is 57.79%, indicating that COHR recovered in the first three days after the plunge. - The 10-day win rate is 58.17%, suggesting a higher probability of recovery within two weeks. - The 30-day win rate is 60.84%, showing that COHR often recovers within a month.2. Return on Recovery: - The average 3-day return is 1.24%, meaning COHR typically gains some value in the first three days after the plunge. - The average 10-day return is 2.60%, indicating a stronger recovery trend over the next two weeks. - The average 30-day return is 8.05%, with a maximum return of 17.55% observed on day 59, suggesting that COHR can experience significant gains in the short term after a steep drop.3. Maximum Return Timing: - The maximum return of 17.55% was observed on day 59, which is within the 30-day window, highlighting the potential for substantial gains if the recovery is timely.In conclusion, while a 20% intraday plunge in COHR is a significant event, the historical data suggests that the ETF tends to recover and perform well in the immediate aftermath. Investors might consider this information when assessing the potential impact of such a drop on their investment strategy.

Act Now: COHR at Pivotal Crossroads
Coherent’s 20% collapse signals a critical inflection point. Immediate focus should be on the $88.47 gamma flip level and $90 psychological support. A breakdown below $88.47 could trigger a cascade of algorithmic selling, while a rebound above $90 may attract AI infrastructure longs. Sector leader Cisco (CSCO -1.2%) hints at broader tech sector fragility. Investors should prioritize short-term options like COHR20250822P88 for bearish exposure or watch for a $90 retest before committing to longs. The next 48 hours will determine whether this is a buying opportunity or a deeper selloff.