How Analysts View II-VI's Acquisition Of Coherent?

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  • Barclays analyst Tom O'Malley downgraded II-VI Inc IIVI to Underweight from Equal Weight with a price target of $56, down from $65.
  • The analyst believes II-VI shares will continue to be an underperformer saying 3D sensing "is now a headwind," and its core business is a low single-digit grower. 
  • Additionally, the acquired Coherent Inc COHR business is at a cyclical peak, and post-deal, the combined entity would be more significant than three times levered "into a potential correction," O'Malley notes.
  • Stifel analyst Patrick Ho resumed coverage of Coherent with a Hold rating and $270 PT, implying an 8% upside to reflect the II-VI acquisition price.
  • Though he has argued that there may be other "better fits" for Coherent, Ho acknowledges many synergies in cost and revenue from this deal, bringing greater diversification and long-term accretion potential for II-VI. 
  • He has concerns over China's approval since geopolitical reasons could stall the approval process.
  • Price Action: IIVI shares traded lower by 7.59% at $55.99, while COHR was down 1.33% at $249.75 on the last check Monday.
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Posted In: Analyst ColorNewsDowngradesPrice TargetInitiationAnalyst RatingsTechBriefs
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