Coherent Plunges 6% Amid Earnings Disappointment and Strategic Shifts: Is the Sell-Off a Buying Opportunity?

Summary
• Coherent (COHR) tumbles 5.98% to $113.57, hitting a 52-week low of $113.02
• Analysts split on AI growth potential after mixed Q4 earnings and business divestiture
• Options market shows heightened volatility with 20 contracts trading near key support levels
• Sector leader Cisco (CSCO) declines 0.98%, signaling broader tech sector caution

Coherent’s sharp intraday drop reflects a confluence of earnings underperformance, strategic divestitures, and sector-wide profit-taking. The stock’s 6% decline has triggered a reevaluation of its AI-driven growth narrative, with options activity and technical indicators pointing to a critical juncture for long-term holders.

Earnings Disappointment and Strategic Divestiture Trigger Sell-Off
Coherent’s 6% decline stems from a combination of weak Q4 guidance and the announced sale of its aerospace and defense business to Advent for $400 million. The earnings report revealed a 16.9% drop in share price following a 21% intraday plunge, driven by concerns over datacom market saturation and reduced margins from the divestiture. Analysts at B of A and Seeking Alpha highlighted the stock’s vulnerability to AI valuation corrections, while the sale of a core business unit raised questions about long-term growth sustainability.

Communication Equipment Sector Under Pressure as Cisco Drags Down Peers
The Communication Equipment sector, led by Cisco (CSCO) at -0.98%, reflects broader market caution. While Coherent’s 6% drop outpaces the sector’s decline, its exposure to AI and datacenter demand creates a divergent trajectory. Cisco’s stable performance contrasts with Coherent’s volatility, underscoring the latter’s reliance on high-growth, high-risk segments like optical innovation and VCSEL partnerships.

Options and ETF Plays for Navigating Coherent’s Volatility
• MACD: 3.62 (above signal line 3.43, bullish divergence)
• RSI: 56.63 (neutral, no overbought/oversold signals)
• Bollinger Bands: Price at $113.57 near lower band ($103.55), suggesting oversold conditions
• 200D MA: $87.20 (price at $113.57, 30% above long-term trend)

Coherent’s technicals suggest a short-term bounce from key support levels, with the 200-day moving average ($87.20) acting as a critical floor. The options market favors put buyers with high leverage and moderate delta, as volatility remains elevated (IV range: 43.77%–170.27%).

Top Options Picks:
• COHR20251031P109 (Put, $109 strike, Oct 31 expiry)
- IV: 49.76% (moderate)
- LVR: 63.80% (high leverage)
- Delta: -0.290 (moderate sensitivity)
- Theta: -0.0218 (moderate time decay)
- Gamma: 0.0366 (high sensitivity to price moves)
- Turnover: 356 (liquid)
- Why: Balances leverage and liquidity for a bearish play, with 63.3% implied move potential if price drops 5% to $108.40.

• COHR20251031P110 (Put, $110 strike, Oct 31 expiry)
- IV: 51.38% (moderate)
- LVR: 50.92% (high leverage)
- Delta: -0.334 (moderate sensitivity)
- Theta: -0.0160 (low time decay)
- Gamma: 0.0377 (high sensitivity to price moves)
- Turnover: 613 (high liquidity)
- Why: Offers 79.84% implied move potential with lower theta decay, ideal for a longer-term bearish bet if support at $103.55 fails.

Payoff Estimation:
At 5% downside (ST = $108.40):
• COHR20251031P109: $109 - $108.40 = $0.60 intrinsic value (60% return on $109 strike)
• COHR20251031P110: $110 - $108.40 = $1.60 intrinsic value (160% return on $110 strike)

Action: Aggressive bears should prioritize COHR20251031P109 for short-term volatility, while COHR20251031P110 suits a longer-term bearish stance.

Backtest Coherent Stock Performance
Unfortunately, the event-backtest engine returned an internal error because the list of qualifying events turned out to be empty. That usually happens when no trading day between 2022-01-01 and today recorded an intraday low at least 6 % below the previous day’s close for COHR (NASDAQ: COHR).In other words, the −6 % “intraday plunge” you specified never occurred in this period, so the system could not calculate any post-event performance statistics and the engine stopped with a “no data” exception.How would you like to proceed?1. Lower the threshold (e.g., −4 % or −5 %) to capture more events.2. Use a different plunge definition (e.g., close-to-close drops of −6 %).3. Extend the time range further back (earlier than 2022).4. Cancel the analysis.Let me know which option you prefer, and I’ll rerun the back-test accordingly.

Critical Support Levels and Sector Dynamics to Watch Before October 31
Coherent’s 6% drop has created a pivotal moment for investors, with key support at $103.55 (lower Bollinger Band) and $109 (strike price of top put options) offering directional clarity. The stock’s technicals suggest a potential rebound if buyers emerge near $103.55, but a breakdown below this level would validate bearish sentiment. Meanwhile, sector leader Cisco’s -0.98% decline highlights broader tech sector caution. Investors should monitor the October 31 expiry for options-driven liquidity and watch for a catalyst—either a rebound in AI demand or further earnings disappointments—to dictate next steps. Act now: Position in COHR20251031P109 if $109 support fails, or scale into longs if price stabilizes above $113.57.