3 Data Center Stocks Are Soaring—Analysts Think 1 Could Go Higher

Three data‑center suppliers—Lumentum (LITE), SanDisk (SNDK) and Coherent (COHR)—posted strong beats and sharp share gains after recent results: Lumentum revenue rose 58% to $543m with adjusted EPS $1.10 and a 1,570‑bp operating‑margin expansion (shares up ~188% YTD), SanDisk revenue rose 23% to $2.31bn with adjusted EPS $1.22 and a much stronger-than-expected EPS guide midpoint of $3.20 (shares up ~500% over three months), and Coherent revenue rose ~17% to $1.58bn with adjusted EPS $1.16 amid record bookings despite indium‑phosphide laser supply constraints. Despite the operational strength, analysts are mixed—consensus price targets imply meaningful downside for Lumentum (~21%) and SanDisk (~31%) after their rallies, while recent updates are more bullish for Coherent (average ~17% upside, Needham at +37%). The takeaway for institutional investors is that demand dynamics remain robust but valuations are stretched for Lumentum and SanDisk, making them more vulnerable to pullbacks, whereas Coherent presents a more favorable risk/reward profile if supply bottlenecks ease.

Analysis

Lumentum reported revenue of $543 million, a 58% year‑over‑year increase that beat the $525 million estimate, and adjusted EPS of $1.10 beat by $0.07 while adjusted operating margin expanded by 1,570 basis points; the stock jumped ~24% on Nov. 5 and is up roughly 188% in 2025, but the consensus price target just under $191 implies ~21% downside and recent post‑report targets range widely from B. Riley’s $147 (-~40%) to Rosenblatt’s $280 (+~16%), signaling mixed analyst conviction. SanDisk posted revenue of $2.31 billion, up 23% and ahead of the $2.12 billion estimate, with adjusted EPS $1.22 topping estimates by $0.64 and an unusually strong next‑quarter adjusted EPS midpoint of $3.20 versus $1.82 consensus; shares have surged (~500% over three months) and while updated targets average near $258 (implying ~3% downside), the consensus target of $183 still implies ~31% downside. Coherent delivered revenue of $1.58 billion (beat $1.54 billion) and adjusted EPS $1.16, reported record bookings despite indium phosphide laser supply constraints, and expects meaningful supply improvement later in the fiscal year; shares are up ~47% YTD, consensus targets suggest ~1% downside while recent updates average near $163 (~17% upside), indicating a more favorable risk/reward relative to Lumentum and SanDisk. The common thread is robust data‑center demand lifting top‑line and bookings across all three names, but valuations on Lumentum and SanDisk look stretched after rapid rallies whereas Coherent’s mix of bookings strength and improving supply appears to have stronger analyst support; key catalysts to monitor are guidance realization, supply‑chain progress (particularly indium phosphide availability), and next quarter free‑cash‑flow or margin trends.

Key Decisions for Investors

• Consider trimming or avoiding new full-size long positions in Lumentum given its 188% YTD rally and consensus targets implying meaningful downside, take profits on strength or wait for a clear dip before adding
• Exercise caution with SanDisk despite strong guidance; avoid chasing after a ~500% run-up and consider establishing only smaller, conviction-weighted exposure or selling into strength while monitoring the company’s ability to deliver the aggressive EPS guide
• Consider selectively accumulating Coherent on strength or on modest pullbacks because record bookings and expected relief in indium phosphide supply underpin a more attractive analyst-upside profile, but validate recovery in supply before adding materially
• Monitor near-term catalysts—quarterly guidance vs. realized results, indium phosphide supply improvements, flash memory pricing and capacity trends—and use position sizing or hedges to protect against valuation-driven pullbacks