Nvidia Corp. on Monday announced a combined investment of $4 billion in Coherent Corp. and Lumentum Holdings, companies that operate in the optical and photonic technology space.
- Raymond James analyst Simon Leopold reportedly said that Nvidia’s investment in Coherent and Lumentum set up a better long-term payoff for optical shareholders.
- Rosenblatt’s Mike Genovese increased the price target on Lumentum to $900 from $580, and raised Coherent’s price target to $375 from $300, while maintaining a ‘Buy’ rating on both companies’ shares.
- Boutique research company Gordon Haskett believes that Lumentum and Coherent could join the S&P 500 this year.
Nvidia Corp. on Monday announced a combined investment of $4 billion in two companies that operate in the optical and photonic technology space.
The semiconductor company said it would invest $2 billion each in Coherent Corp. (COHR) and Lumentum Holdings Inc. (LITE), alongside multiyear strategic agreements in both firms to advance innovation in optics technologies.
Wall Street analysts also believe COHR and LITE shares are buys, especially in the long term, according to a report from CNBC.
Street Rationale
Raymond James analyst Simon Leopold reportedly said that Nvidia’s (NVDA) investment in Coherent and Lumentum is a sign of the company supporting a larger and healthier ecosystem. He added that it set up a better long-term payoff for optical shareholders.
While Rosenblatt’s Mike Genovese said he doesn’t see an immediate sizable market interest in co-packaged optics, at least until 2029, he raised the price target on both Lumentum and Coherent, and has a ‘Buy’ rating on the shares.
Genovese increased the price target on Lumentum to $900 from $580, and raised Coherent’s price target to $375 from $300.
Meanwhile, JPMorgan’s Samik Chatterjee said as per the report that Nvidia’s investment was an overall positive for both Coherent and Lumentum, “given consistent concerns regarding competitive pressures, particularly from Asia‑based peers, as it underscores the importance of an optical portfolio that extends beyond the transceiver design into critical components and a U.S. manufacturing presence.” Both stocks have an ‘Overweight’ rating from the firm.
Boutique research company Gordon Haskett also believes that Lumentum and Coherent could join the S&P 500 this year. “The S&P 500 should be naming new members on Friday as part of its quarterly rebalance and because these two are now so far out in front of their midcap peers, we’d actually be surprised if the 500 took one and not the other,” Don Bilson, head of Gordon Haskett’s event-driven team, reportedly said in a note to investors.
Stock of rival company Poet Technologies (POET) also garnered retail attention amid a price boost from Nvidia’s confidence in optics technology.
How Did Retailers React?
On Stocktwits, retail sentiment around COHR stock was in the ‘extremely bullish’ territory over the past 24 hours amid ‘extremely high’ message volumes.
Meanwhile, retail sentiment around LITE stock was in the ‘bullish’ territory over the past 24 hours amid ‘high’ message volumes.
While shares of COHR and LITE dipped on Tuesday amid a broader sell-off in the market, COHR stock has more than quadrupled in the last one year, while LITE stock has gained more than 974%.
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