Read Why Morgan Stanley Sees 26% Upside In II-VI


Morgan Stanley analyst Meta Marshall upgraded II-VI, Inc IIVI from Equal-weight to Overweight with a price target of $82, up from $80, implying 26.4% upside.

  • Marshall believes that the pullback in valuation over the last year (down ~12% YTD and ~26% since initial COHR announcement) and current multiple (~17-18x CY23 P/E) is too pessimistic around Coherent Inc (NASDAQ: COHR) transaction risks and recent 3D sensing results. 
  • Marshall believes it misses the earnings potential of the core business, particularly in the midst of a datacom upgrade cycle. 
  • Investor concerns around the transaction have set the name back ~amidnitial bid announcement, primarily around integration concern, the price paid, and where COHR is in their cycle. 
  • Marshall continues to think the acquisition is a positive for IIVI gen the diversification away from datacom, and feel less cautious around integration given confidence in the management team. 
  • Overall, IIVI is nearing the end of de-risking in the name given transaction appears to be closer to closing, and the achievement of COHR synergies should be a catalyst to re-rating in the stock. 
  • Marshall also sees potential tailwinds in SiC business, regaining 3D sensing share, and an essentially healthy telco and datacom market (as Ciena Corp (NYSE: CIEN) & Arista Networks Inc ANET results point to) leave plenty of opportunity for upside in the name. 
  • Risks to Marshall's call would be continued 3D sensing share losses or headwinds to COHR results, pushing out synergy targets.
  • Price Action: IIVI shares traded higher by 2.2% at $66.29 in the premarket session on the last check Wednesday.
Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorNewsUpgradesPrice TargetAnalyst RatingsTechBriefs
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!