Benzinga | Oct 4, 2021 03:20PM EDT

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

* Barclays analyst Tom O'Malley downgraded II-VI Inc (NASDAQ: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 (NASDAQ: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.