2 Oversold Optics Stocks to Buy After the Crash
Fiber optics stocks plunged.
Remarkably, this occurred in the face of incredible earnings reports.
Don’t fret. It’s an opportunity.
Here are 2 oversold optics stocks to buy after the crash.
The optical ecosystem is a powerful theme for AI data center buildouts.
Lasers create the light.
Fiber is the highway.
And photonics controls and manipulates the light:
As data center needs ramp, capacity requirements are only increasing.
More and more information is passing through glass fibers…quicker and more efficiently.
And for confirmation, earnings reports by major optics players have been stunning – proving that demand is here to stay.
Even in the face of solid earning and guidance, the optical space has fallen hard recently.
Our soon to be released Frontiers indexes includes a Photonics thematic index.
Below reveals the latest pullback and the nasty decline from the Situational Awareness liquidation in July:
Whenever top-tier stocks crash, we see a big buy-the-dip opportunity.
2 stocks in particular, sport incredible growth rates and have enjoyed heavy institutional support.
And both names have fallen to very reasonable valuations…suggesting big upside ahead.
2 Oversold Optics Stocks to Buy After the Crash
Back in April, we highlighted the bullish case for photonics stocks. Our stance hasn’t changed.
The latest pullback has created a big, mispriced opportunity in our opinion.
Let’s unpack a couple of optical juggernauts worthy of your attention.
The first oversold optics stock to consider buying is Fabrinet (FN). The $16.5 billion market cap firm specializes in precise manufacturing and packaging of optical components, transceivers, and advanced electronics.
The company recently announced Q4 earnings that were stellar. However, the stock has fallen an incredible 25% in a matter of days.
The price to earnings ratio has fallen to a whopping 24.3X:
During the earnings call, management highlighted that manufacturing capacity is expanding aggressively, targeting $12.5 – $14 billion run-rate over the next several years.
They pointed to data center segment growth being the primary driver into 2027.
One look at the annual revenue estimates by analysts paints a clear picture of the business.
In FY 2027 sales are estimated to reach $6 billion…then soar to $9.41 billion in FY 2029:
From our lens, another liquidation is occurring right now for no fundamental reason.
The flows tell the story.
Below are the money flows for FN the past year. The company sports a rock-solid fundamental rating of 87.5%, while the technical score has plummeted to 41%.
Note the massive inflows (left) in the first half of the year…and only recently we’ve noted outflows.
More importantly on the right, many instances on our Outlier 20 report reveal that this is a high-caliber name with institutional sponsorship:
Don’t let summertime shenanigans bounce you out of great stocks.
The optics theme isn’t stopping anytime soon.
Let’s do another.
The second oversold optics stock to consider owning is Coherent (COHR). The $57.7 billion market cap firm makes the lasers that create light, silicon photonics that control it, and the transceivers to move the data.
Like Fabrinet, Coherent shares have fallen hard recently, diving 25%.
The forward PE has now reached a respectable 28.5X:
Their recent Q4 earnings saw revenues reach $2.05 billion, beating estimates.
Their Q1 EPS guidance clocked in at $1.95 at the midpoint, easily surpassing estimates of $1.77.
The company cited strong sequential growth in data center and communications. The backlog now extends beyond 2028.
Folks, this appears to be a great entry point.
Have a look at the EPS estimates for Coherent.
In FY 2027, EPS is slated to reach $9.43. It’ll ramp to $14.05 in 2028.
Analysts see EPS of $18.53 in 2029.
As we’ve learned, these earnings estimates are likely low. The trend continues up and to the right.
And so have the money flows.
All year, big inflows have been the story for COHR.
This is the primary driver for the stock soaring 55% in 2026.
Notice the relentless inflows (left). That the stairway to heaven formation! Only in late July did we see outflows…lining up with the Situational Awareness liquidation.
The stock made many appearances on our Outlier 20 report (blue bars below):
Look, summertime jitters are normal. This year is no exception.
Data center buildouts are accelerating with backlogs lasting years.
Optics and photonics stocks are prime beneficiaries of this theme.
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AND don’t miss my deep dive conversation with Jason Bodner on our 4 best optical stocks to buy after this crash. We dive into these stocks and more.
Enjoy!