Hedge Fund Divisar Dumped nLIGHT Shares Worth $9.6 Million. Is the Stock a Buy or Sell?

Divisar Capital sold 287,005 nLIGHT (NASDAQ:LASR) shares in Q4 2025, an estimated $9.59M of stock, leaving 288,438 shares valued at ~$10.82M and reducing the LASR stake to 3.04% of 13F AUM (down from 5.73%). nLIGHT reported record 2025 revenue of $261.3M (up ~32% YoY) and a narrowed net loss of $23.5M (vs a $60.8M loss prior year), while the share price was $50.89 on Feb 17, 2026 (up 392.2% over the past year). The stock now trades at a P/S north of 11, indicating rich valuation despite improving fundamentals; the 13F sale likely reflects profit-taking rather than a fundamental downgrade.

Analysis

A sizable reweight by a major holder is functioning as a liquidity event more than a negative read on technology; selling into strength is consistent with portfolio-level risk-taking rather than a thesis failure. Expect near-term price pressure tied to rebalancing flows and option gamma dynamics, but fundamentally driven moves will be decided by bookings cadence and margin expansion over the next 2-4 quarters.

From a competitive angle, continued revenue and margin improvement at the company accelerates a capital cycle among upstream component suppliers (pump diodes, fiber preforms, beam-control optics) — that benefits vertically adjacent names but risks shorter-term margin compression as incumbents expand capacity. Conversely, meaningful defense contract wins would raise the bar for new entrants and create stickier revenue, compressing downside risk for a multi-year horizon.

Key catalysts and risks map cleanly by timeframe: in days–weeks watch flow/liquidity and technical support; in 1–3 quarters watch order intake, inventory digestion at OEMs, and gross-margin inflection; over multiple years, expect durability of defense and semiconductor content to determine whether current valuation multiples are justified. Tail risks include a demand pullback in key end markets or a single large OEM inventory correction which could force a sharp re-rating.

Given the elevated multiple environment, planning trades around quantifiable triggers and asymmetric option structures is preferable to blunt directional exposure.

Key Decisions for Investors

• Relative-value pair: Short LASR / Long LITE sized 1:1 notional, horizon 3–6 months. Rationale: capture mean reversion if momentum stalls while owning exposure to a larger-cap supplier with more diversified end markets. Risk management: cut pair if LASR outperforms LITE by >20% or if order trends positively surprise two consecutive quarters.
• Asymmetric downside hedge: Buy 9–12 month out-of-the-money LASR put spread (10–20% OTM) sized to protect 1–2% portfolio exposure. Reward: 3–5x payoff if stock re-rates lower; cost limited to premium paid. Exit: close on either 40% of max spread value or after quarterly guidance print.
• Event-driven long: Add small LASR long via 6-month call or call spread after an intra-month pullback ≥25% from local highs, targeting a 40–60% upside move on order-book acceleration. Risk control: position size <1% NAV and stop if bookings growth decelerates YoY two consecutive quarters.
• Monitor trigger alerts (no immediate trade): set watches for (a) sizable defense contract awards; (b) sequential gross-margin expansion >200bps; (c) OEM inventory destocking signals. Use these to convert option-hedged exposures into directional positions with clear stop-losses.