3. Coherent Corp. (NASDAQ:COHR)
Number of Hedge Fund Holders: 36
Scion Asset Management’s Stake Value: $5,265,000
Coherent Corp. (NASDAQ:COHR) is a Pennsylvania-based company that develops, manufactures, and sells engineered materials, optoelectronic components, and devices worldwide. It operates in two segments, Compound Semiconductors and Photonic Solutions. Michael Burry added Coherent Corp. (NASDAQ:COHR) to his Q4 portfolio by purchasing 150,000 shares worth $5.2 million, representing 11.31% of the total securities.
On February 9, Cowen analyst Paul Silverstein reiterated an Outperform rating on Coherent Corp. (NASDAQ:COHR) but lowered the firm’s price target on the shares to $87 from $95. The analyst stated that Coherent Corp. (NASDAQ:COHR)’s long-term perspective has not changed, as they believe that there are strong ongoing demand trends in the company’s end markets, as well as effective company-specific execution. Furthermore, the analyst believes that investors are currently not fully recognizing the company’s strategic vision and operational expertise.
According to Insider Monkey’s Q3 data, 36 hedge funds were long Coherent Corp. (NASDAQ:COHR), compared to 33 funds in the preceding quarter.
Giverny Capital made the following comment about Coherent Corp. (NASDAQ:COHR) in its Q4 2022 investor letter:
“Coherent Corp. (NASDAQ:COHR)’s stock price plunged last year in response to the merger of predecessor company II-VI and the laser systems manufacturer Coherent. The combined company is a leading designer and manufacturer of compound semiconductors, opto-electronic components and laser systems used in optical communications, manufacturing, life sciences and defense applications. Coherent generally is a number one or number two supplier to customers in structurally growing markets. The bad news is that the old II-VI borrowed a lot of money to buy Coherent, and the new company could be at risk in a recession if demand sinks below levels required to service the debt.
II-VI’s stock price was $90 when it agreed to buy Coherent. We bought the stock at around $60 as the market digested the news. And as I write this, the new company, which kept the Coherent name but is run by II-VI management, trades for about $40. That is roughly 10x expected earnings for 2023 of about $4 per share. Given the deep moats around its intellectual property and strong demand from customers, I believe Coherent needs to make progress on paying down acquisition debt over the next year or two to unlock significant equity value. Coherent finished the year as our smallest position at about 1.5%. We added to the position in January.”
