Myriad Growth Catalysts to Power Coherent Stock Higher
Today’s stock represents another of our favorite investing methods. It is called venture capital investing and involves investing in the stocks of companies that have innovative products that are distributed to a number of industries. Investors in such stocks can make huge returns as such products gain increased market share as well as create new markets for themselves.
Case in point being Coherent, Inc. (NASDAQ:COHR), which is a leading provider of laser and laser-based technology deployed by scientific, commercial, and industrial customers. The company’s products cater to a broad range of applications that are grouped in the following markets: microelectronics, materials processing, OEM components and instrumentation, and scientific research and government programs. Coherent strives to develop innovative and proprietary products and solutions that are based on its core expertise in lasers and optical technologies. This shall likely keep powering COHR stock higher.
As the demand for emerging displays for devices like smartphones and tablets continues going up, the company’s microelectronics segment keeps performing better. This segment made up for more than 50% of total sales in the third quarter. Material processing made up about 30% of the revenue, as laser continues to displace conventional technology as it does the job faster, better or more economically.
Laser technology is transforming many areas of our lives without us realizing it. As photonics becomes a critical enabling technology of this era, areas like industrial automation, microelectronics, flat panel displays, and medical diagnostics and many others shall see increased adoption in more diverse applications.
As per a research report by MarketsandMarkets, the global photonics market, which was around $452.0 billion in 2015, is estimated to reach a little over $724.0 billion by 2021. This translates into a CAGR of 8.4% between 2016 and 2021. The growth is driven by the increased demand for such technology in industrial segments, telecommunications etc. (Source: “Photonics Market worth 724.22 Billion USD by 2021,” MarketsandMarkets, September 2016.)
Coherent, Inc. is in a great position to take advantage of this uptrend. Just to cite an example, the company has a leadership position in excimer laser annealing (ELA) technology, which is critical for manufacturing flat panel displays, both LCD and OLED. As the company sees strong demand in its core markets, it shall continue seeing its sales and earnings grow in the coming quarters, which bodes well for Coherent stock.
Coherent already has a record backlog with an impressive product mix. Moreover, through the acquisition of Rofin-Sinar Technologies Inc. last year, there is a significant upgradation in the company’s capabilities in the largest market for lasers. Rofin is one of the world’s leading developers and manufacturers of high performance industrial laser sources and laser based solutions and components.
The company is leveraging its technology portfolio to lead the proliferation of photonics into broader markets. This has also been evident from the strong results that the company posted in its third quarter. The company announced strong results with impressive earnings and revenue growth and guidance that was above expectations.
COHR stock is up almost 59% in the year to date and has posted more than 340% returns over the last five years. This strong performance is a reflection of the fact that the company is well prepared to ride this next growth wave in laser-based technologies.
Chart courtesy of StockCharts.com
Coherent stock is most likely to post further triple digit returns as the core markets of the company continue to expand. The microelectronics market continues to thrive as smartphones, tablets, wearables etc. drive advances in displays and integrated circuits. The semiconductor and device manufacturers shall keep looking for ways to manufacture smaller and more powerful devices at lower cost, thereby raising the demand for new laser technologies.
Even in materials processing, lasers continue to gain wider acceptance in many important manufacturing applications including cutting, welding, and marking of metals and non-metals. This shall keep the demand up for Coherent’s high power industrial laser systems that are used for many materials processing applications.
Coherent has the broadest product portfolio in the laser industry, and it offers solutions for almost any application on any material to its customers. This makes a strong case for the buoyant demand for its products in the years to come.
Key laser applications like semiconductor inspection, flat panel display manufacturing, solar cell production, materials processing etc. as well as the advent of industrial-grade ultra-fast lasers shall likely keep the company ahead of its competition. Investors could consider Coherent stock as the classic venture capital stock that has the potential to provide more triple-digit returns.