Your Portfolios in Brief
Founded in 1971, Coherent Corp. is a global leader in optical materials, networks, and lasers. Formerly known as II-VI Incorporated, the company acquired Coherent Inc. in 2022, adopting its current name. With a presence in 130 locations worldwide and thousands of employees, Coherent Corp. plays a key role in technological innovation.
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Key Highlights of 2024
• Annual Guidance & Quarterly Performance: Coherent Corp. reported $1.43 billion in revenue, up 6% from the previous quarter and 27% year-over-year.
• Non-GAAP Gross Margin: 38.2%, an improvement of 146 basis points from the prior quarter and 363 basis points year-over-year.
• Non-GAAP Operating Expenses: $283 million, up from $278 million in the previous quarter.
• Non-GAAP Operating Margin: 18.5%, compared to 16.1% in the prior quarter and 13.5% last year.
• Non-GAAP Earnings per Share (EPS): $0.95, up from $0.67 in the prior quarter and $0.27 last year.
• Debt Repayment: $132 million repaid during the quarter.
• Segment Growth:
o Network Revenue: +7% QoQ, +56% YoY
o Laser Segment Revenue : +8% QoQ, +6% YoY
o Materials Segment Revenue: +3% QoQ, -4% YoY
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Why This Stock is Worth Watching
Coherent Corp. is well positioned to benefit from the continued growth of artificial intelligence (AI) and the increasing demand for data center connectivity. Its data transceivers are critical for modern infrastructure, making it a key player in the industry.
Furthermore, the company tripled its indium phosphide production over the past year to support its 800-gigabit transceiver products and received its first order for its new optical switching platform for data centres, opening new market opportunities.
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Conclusion
Coherent Corp. (COHR) continues to show strong market performance. Following its quarterly earnings release on Wednesday, its stock closed at $90.10, up 2.59% on the day. Despite a -9.66% decline year-to-date, the stock has seen an impressive 129.20% surge in 2024, demonstrating strong growth momentum and exceptional resilience.
Analysts remain optimistic about Coherent Corp.’s outlook. 12-month price targets suggest an average estimate of $107.64, with a high estimate of $135. This reflects investor confidence in the company’s strategy and innovation.
At Pratte Portfolio Management, we recognized Coherent Corp.’s potential and added the stock to our portfolio just days before the earnings release, anticipating its ability to generate value for our investors. The company’s past performance and future outlook confirm that this was a wise investment, and we remain confident in its long-term contribution.
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Markets in Brief
Monday
• Dow Jones: -0.28% (44,421.91 points)
• S&P 500:-0.76% (5,994.57 points)
• NASDAQ: -1.20% (19,391.96 points)
• TSX: -1.14% (25,241.76 points)
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Markets Hit by Trade Tensions
The announcement of new U.S. tariffs rattled the markets. Washington imposed 25% tariffs on imports from Canada and Mexico, along with a 10% surtax on Chinese products. The news triggered an initial selloff, with the Dow Jones dropping as much as 665 points before trimming losses following a temporary reprieve for Mexico and Canada.
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Temporary Relief for Mexico and Canada
Donald Trump confirmed that the new tariffs on Mexico would be suspended for one month following an agreement with Mexican President Claudia Sheinbaum, who agreed to deploy 10,000 soldiers to the border. Later, Canada also secured a 30-day delay after discussions between Justin Trudeau and the U.S. President. These announcements eased market pressure, helping reduce losses from earlier in the day.
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Industrial and Tech Stocks Struggle
Industrial and tech stocks were particularly affected by trade tensions, as investors feared rising production costs and supply chain disruptions.
• Nvidia: -2.84%
• Apple: -3.39%
• Tesla: -5.17%
• Microsoft: -1.00%
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Automotive Sector Under Pressure
The auto sector was heavily impacted, as U.S. manufacturers rely heavily on Mexican and Canadian plants.
• Ford: -1.88%
• General Motors: -3.15%
• Stellantis: -3.88%
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Logistics & Consumer Goods Also Affected
The transportation and consumer sectors also suffered significant losses, due to fears of higher logistics costs and inflationary pressure on imported goods.
• FedEx: -6.62%
• UPS: -2.57%
• Constellation Brands (Corona, Modelo): -3.53%
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Rising Bonds & Volatility
As uncertainty grew, investors flocked to U.S. bonds, pushing the 10-year Treasury yield to 4.56%, up from 4.54% on Friday. Meanwhile, the VIX Index, which measures market volatility, soared by 13.33%.
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Tuesday
• Dow Jones: +0.30% (44,556.04 points)
• S&P 500:+0.72% (6,037.88 points)
• NASDAQ: +1.35% (19,654.02 points)
• TSX: +0.15% (25,279.35 points)
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Markets rebound on tech stocks
After a tough session on Monday, indices rebounded, supported by gains in technology stocks and easing trade tensions with Canada and Mexico. Investors welcomed Palantir’s strong results (+23.99%), which far exceeded expectations and boosted overall market sentiment.
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China’s New Trade Tariffs
Beijing announced the imposition of tariffs ranging from 10% to 15% on certain U.S. products, including coal, liquefied natural gas, oil, and agricultural equipment. However, investors considered this retaliation to be moderate, allowing markets to maintain their bullish momentum.
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Palantir leads, semiconductors follow
Palantir’s strong earnings fuelled gains in the technology sector, particularly among semiconductor stocks.
• Palantir: +23.99%, driven by a 36% revenue growth in Q4.
• Nvidia: +1.71%, benefiting from the tech rally.
• Apple: +2.10%, ahead of its quarterly earnings release.
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Earnings-driven market movements
Several stocks experienced significant swings due to mixed corporate earnings.
• Estée Lauder: -16.07%, after announcing the elimination of 5,800 to 7,000 jobs by 2026.
• Merck: -9.07%, impacted by declining sales of its Gardasil vaccine.
• Alphabet (Google): -7.00% (after hours), disappointed by slower cloud business growth.
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Bonds and currencies
The 10-year Treasury yield eased to 4.52%, down from 4.56% the previous day, indicating a slight decline in investor nervousness. The Canadian dollar recovered, trading at 69.71 US cents, up from 68.48 US cents on Monday.
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Commodities in motion
• Oil: -0.63% ($72.70 per barrel)
• Natural Gas: -3.00% ($3.25)
• Gold: +0.66% ($2,875.80 per ounce)
• Copper: +0.92% ($4.35 per pound)
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Wednesday
• Dow Jones: +0.71% (44,873.28 points)
• S&P 500:+0.39% (6,061.48 points)
• NASDAQ: +0.19% (19,692.33 points)
• TSX: +1.15% (25,569.84 points)
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AI fuels markets despite mixed earnings
Alphabet CEO Sundar Pichai’s announcement of a $75 billion investment in artificial intelligence for 2025 bolstered market optimism, boosting AI-related stocks. This move follows Meta’s previously announced $60–65 billion spending commitment for the same period.
Despite this, Alphabet dropped -7.29% after posting lower-than-expected quarterly results, particularly in its cloud division. Nvidia (+5.21%), Broadcom (+4.30%), and Micron (+3.24%) benefited from the growing enthusiasm for AI.
Additionally, Nvidia surged over 5% after Super Micro Computer announced the full availability of its AI data center powered by Nvidia’s Blackwell platform. Super Micro also jumped 8% on the news.
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Semiconductors Rally, Except for AMD
The semiconductor sector was the biggest winner of the session, fuelled by AI expansion. Nvidia led the gains, followed by Broadcom and Micron.
However, Advanced Micro Devices (AMD) was the exception, tumbling -6.27% due to disappointing results in its data center segment.
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Amgen boosts the Dow Jones
Amgen contributed to the Dow Jones’s gains, rising +6% on stronger-than-expected Q4 earnings, with both adjusted profits and revenue exceeding forecasts.
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Disney and Uber struggle, Mattel surges
• Disney: -2.44%, hit by declining Disney+ subscriptions.
• Uber: -7.56%, weighed down by a disappointing Q1 outlook.
• Mattel: +15.33%, boosted by strong Hot Wheels sales and better-than-expected earnings.
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Bond market supports equities
U.S. 10-year Treasury yields fell to 4.42% (from 4.52% the previous day), providing support for equities despite ongoing economic slowdown concerns.
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Commodities and currencies
• Oil: USD -1.67 ($71.03 per barrel)
• Gold: USD +17.20 ($2,893 per ounce)
• Copper: +9 cents USD ($4.44 per pound)
• Canadian dollar: 69.95 US cents (+0.24 cent U
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Thursday
• Dow Jones: -0.28% [44,747.63 points]
• S&P 500:+0.36% [6,083.57 points]
• NASDAQ: +0.51% [19,791.99 points]
• TSX: -0.14% [25,534.49 points]
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U.S. indexes continue their upward trend
The S&P 500 and NASDAQ recorded their third consecutive session of gains, driven by strong corporate earnings and economic resilience. However, the Dow Jones declined, weighed down by losses in the industrial sector and disappointing earnings from some major companies.
Investors closely monitored discussions surrounding new U.S. tariffs on Chinese imports, although the pause on duties for Mexico and Canada helped stabilize market sentiment.
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Mixed corporate earnings: surprises and disappointments
• Philip Morris surged +10.95% after reporting better-than-expected quarterly earnings, driven by strong demand for its smoke-free products.
• Ralph Lauren climbed +9.69%, reaching a record high thanks to strong sales performance and an upward revision of its annual forecasts.
• Peloton surprised positively with a +12.01% jump, supported by revenue exceeding expectations and a raised guidance.
On the other hand, several companies disappointed investors:
• Skyworks Solutions plummeted -24%, dragged down by disappointing quarterly results and cautious outlooks.
• Ford fell -7.5% after announcing cautious forecasts for 2025 due to challenges in the automotive market.
• Honeywell lost -5.64%, as investors reacted negatively to its growth outlook and the announcement of a split into three separate entities.
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Sectors in motion
• Technology: Despite Nasdaq’s rise, the sector showed mixed performances. Qualcomm and Arm lost over 3% each, while Skyworks Solutions plummeted after earnings.
• Energy: The sector declined -1.5%, affected by a drop in oil prices.
• Consumer discretionary: Ralph Lauren and Tapestry [+16%] benefited from strong earnings, while some retail stocks struggled.
• Defensive stocks: The consumer staples sector gained +0.7%, confirming its role as a safe haven during uncertain times.
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Commodities and currencies in motion
• Gold reached a historic high before retreating to $2,876.70 per ounce [USD -16.30], as interest rate concerns eased.
• Oil declined to $70.61 per barrel [-0.59%], impacted by rising U.S. stockpiles.
• The Canadian dollar traded at 69.82 US cents, down against the U.S. dollar.
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Friday
• Dow Jones: +24 points
• S&P 500: stable
• Nasdaq Composite: stable
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Markets React to Employment Data
The report released on Friday showed the creation of 143,000 jobs in January, a figure below expectations. However, the unemployment rate decreased from 4.1% to 4%, and job figures for December and November were significantly revised upwards. Additionally, average hourly wage growth exceeded forecasts, reigniting inflation fears.
In response to this data, the 10-year Treasury yield surpassed 4.47%, putting pressure on market sentiment.
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Notable Stock Performances
• Pinterest: The stock surged 20%, reaching a quarterly revenue of $1.15 billion, an 18% increase from the previous year. The number of active monthly users hit a record 553 million, up 11%.
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Amazon Hit by a Stronger Dollar and Disappointing Outlook
Amazon’s stock dropped by more than 2% following the release of its fourth-quarter results, not due to past performance—which exceeded expectations—but because of disappointing first quarter 2025 forecasts. The company expects revenue growth of 5% to 9%, marking the slowest quarterly growth in its 28 years as a publicly traded company.
A key factor behind this downward revision is the appreciation of the U.S. dollar, which negatively impacts international revenues. Amazon estimated that unfavourable exchange rates would result in a $2.1 billion hit [or 150 basis points] to its first-quarter revenue. In the last quarter, the company already faced an additional $700 million loss due to currency fluctuations, a higher-than-expected amount.
With 23% of its revenue coming from international markets, Amazon is less exposed to currency fluctuations than its tech peers like Apple [58%], Meta [55%], Alphabet [52%], and Tesla [over 50%]. However, this increasing reliance on global markets is becoming a major issue for the e-commerce giant, especially as uncertainties surrounding Donald Trump’s trade policies and the risk of a trade war with China could further heighten dollar volatility in the coming months.
Investors will closely monitor employment trends and upcoming Federal Reserve decisions, as the strong dollar continues to weigh on the growth prospects of tech companies.
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Canadian Job Market in January
Statistics Canada reported a decline in the unemployment rate to 6.6% in January 2025, down from 6.7% in December. The Canadian economy created 76,000 jobs, exceeding analysts’ expectations of 25,000 new hires. Gains were observed in both full-time and part-time positions, with significant growth in the manufacturing and professional, scientific, and technical services sectors.
Youth employment [ages 15–24] also improved, with the unemployment rate dropping from 14.2% to 13.6%. However, average hourly wage growth for permanent employees slowed slightly, from 3.8% in December to 3.7% in January. These figures suggest a relatively resilient Canadian labor market, although economic uncertainties remain.
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Conclusion
Despite a challenging start to the week due to the announcement of new tariffs by President Donald Trump, major indices are heading for modest weekly gains, supported by positive corporate earnings and increased optimism regarding trade agreements.
