TLDR
- Coherent and Lumentum have dropped more than 15% from their early-June highs
- J.P. Morgan reiterates Overweight on both stocks with price targets of $380 (COHR) and $1,130 (LITE)
- The pullback is linked to triple-digit gains earlier in 2026 and co-packaged optics delay worries
- Both stocks trade at ~25x estimated 2028 earnings despite forecast 40% annual earnings growth
- J.P. Morgan’s channel checks suggest co-packaged optics adoption is on track, not slipping
Coherent (COHR) was trading at $359.05 and Lumentum (LITE) was at $869.06 in premarket Thursday, both down more than 15% from their early-June peaks. J.P. Morgan thinks that’s a buying opportunity.
The bank reiterated Overweight ratings on both optical-networking names in a note Thursday. Price targets stay at $380 for Coherent and $1,130 for Lumentum.
Analyst Samik Chatterjee pointed to two main reasons for the selloff. First, both stocks had already put up triple-digit percentage gains to start 2026. Second, investors got nervous about potential delays in co-packaged optics adoption — a technology designed to replace copper wiring in data centers.
Chatterjee wrote that “once-lofty optical premiums begin to look more palatable to investors,” and that the pullback has created a more interesting entry point.
At current prices, both stocks trade at around 25 times estimated 2028 earnings. That looks reasonable given J.P. Morgan’s forecast for 40% annual earnings growth from both companies.
Co-Packaged Optics Timeline Holds
One of the bigger worries driving the selloff was whether co-packaged optics would face delays. J.P. Morgan pushed back on that.
Feedback gathered from investors at the Computex exhibition last week suggested Nvidia’s optics ramp is actually tracking ahead of schedule, not behind it. That removes one of the key reasons for the recent drop.
Nvidia (NVDA) remains a central driver of demand here. Chatterjee noted that Nvidia likely accounts for the majority of existing revenue outlooks for both Coherent and Lumentum.
New Buyers Joining the Boom
Beyond Nvidia, J.P. Morgan flagged that select cloud-service providers and other buyers are starting to enter the optical-networking space.
Chatterjee said these new buyers “would be additive to current forecasts,” meaning estimates haven’t fully priced them in yet. That’s a potential upside catalyst that the market may be overlooking right now.
Lumentum rose 3.8% on Wednesday and gained another 1.9% in premarket Thursday. Coherent was up 1.2% Thursday after a slight dip the session before.
Wall Street broadly agrees with J.P. Morgan’s positive stance. Of more than two dozen firms tracked by FactSet, 81% rate Lumentum a Buy and 76% have a Buy rating on Coherent.
The stocks remain well-supported even after the recent pullback, with no major analyst downgrades accompanying the price decline.
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