Is Coherent Well-Positioned to Sail Through the EV Wave?

Coherent Corp. (COHR), a leader in Silicon Carbide (SiC) substrates for EV power electronics and battery manufacturing lasers, is strategically positioning for long-term growth in the expanding EV market. The company secured a $1 billion investment from DENSO and Mitsubishi Electric for 200mm SiC scaling and divested its aerospace/defense unit for $400 million to reduce debt and fund AI/EV R&D. Despite a 6% year-over-year revenue decline in its Materials segment in 2025 due to softer automotive demand and intense competition, COHR is expected to boost R&D. The stock has gained 18.8% over the past year, trading at a forward P/E of 18.2x (below the industry average), with recent earnings estimates for FY26/27 showing increases of 4.1% and 11.2% respectively.

Analysis

Coherent Corp. (COHR) is executing a strategic pivot to capitalize on the long-term growth of the electric vehicle (EV) market, where its Silicon Carbide (SiC) substrates and laser technologies are critical components. The company has fortified its position with a $1 billion investment from DENSO and Mitsubishi Electric to scale 200mm SiC manufacturing and has streamlined its focus by divesting its aerospace and defense business for $400 million, freeing up capital to reduce debt and reinvest in core EV and AI R&D. Despite these positive strategic moves, COHR faces near-term headwinds, evidenced by a 6% year-over-year revenue decline in its Materials segment in 2025 due to softer demand in the automotive and SiC markets. Financially, the stock's 18.8% gain in the past year has outpaced the S&P 500 and key competitors, though it lags its specific industry's rally. From a valuation standpoint, COHR trades at a forward P/E of 18.2x, a significant discount to its industry average of 26.52x. This attractive valuation is complemented by positive forward-looking indicators, including upward consensus estimate revisions for FY2026 and FY2027 earnings of 4.1% and 11.2% respectively, signaling analyst confidence in its long-term strategy amidst a competitive landscape that includes Applied Materials (AMAT) and Cognex (CGNX).

Key Decisions for Investors

• Investors should consider Coherent's strategic repositioning towards the high-growth EV market, which is supported by a significant $1 billion external investment and a divestiture strengthening its balance sheet for R&D.
• The stock's forward P/E of 18.2x, which is substantially below the industry average, presents a potentially attractive valuation for a company exposed to strong secular tailwinds, especially given the positive recent revisions to FY26 and FY27 earnings estimates.
• It is crucial to monitor for signs of a recovery in the automotive and SiC end markets, as the recent 6% revenue decline in the Materials segment highlights a key near-term risk to the investment thesis.
• Closely track the company's R&D progress and competitive positioning against rivals like Applied Materials and Cognex, as market share gains in the fiercely competitive power electronics and battery manufacturing space will be critical for realizing its long-term growth potential.