Raymond James upgrades Coherent and Lumentum post-Nvidia conference

Raymond James has upgraded two stocks, Coherent and Lumentum Holdings, following Nvidia's recent GPU Technology Conference. The investment bank changed its rating for both companies to "strong buy" from "outperform." Coherent's price target was lowered to $91 from $110, suggesting a potential increase of over 33% from its last closing price. Lumentum's target also fell, from $96 to $82, indicating a possible rise of more than 23%. Both stocks have seen significant declines recently, with Coherent down more than 31% and Lumentum down about 21% in the last three months. Analyst Simon Leopold believes that worries regarding Co-Packaged Optics (CPO) have led to unnecessary pressure on these stocks. He anticipates that the upcoming Optical Fiber Communications Conference may provide clarity and boost the market for both companies. Leopold expects strong demand in AI technology to drive sales, forecasting AI backend transceiver sales to reach $22 billion by 2030. The entire datacom market, which includes both AI and non-AI components, is projected to hit $30 billion by 2030. This growth could significantly benefit Coherent and Lumentum. Leopold estimates that Coherent could make $7.5 billion in revenue from its datacom business by 2030, while Lumentum could generate $4.5 billion. The overall sentiment for both companies is positive among Wall Street analysts. Of 21 analysts tracking Coherent, 15 recommend buying it. For Lumentum, 12 of 17 analysts also rate it as a buy. Shares of both companies surged between 8% and 10% early Monday following the announcement.