11:15 AM EDT, 08/12/2024 (MT Newswires) -- Coherent's (COHR) new chief executive, Jim Anderson, could drive operational improvements in the company, especially gross margin expansion, BofA Securities said Monday.

The firm said in a note that Coherent's roughly 36% gross margin is among the lowest in the semiconductor sector.

"But we expect progress towards 40% based on higher sales volumes and potential restructuring/operational actions under the new CEO," BofA said.

The firm said it expects artificial intelligence to help accelerate the company's topline from an anticipated 9.5% year-over-year decline in fiscal year 2024 to a compound annual growth rate of 13% from fiscal years 2024 to 2027.

BofA anticipates a 13% compound annual growth rate in sales for the company over the fiscal years 2024 to 2027, with the data communications transceiver business playing an important role.

"The most important driver will be [Coherent's] datacom transceiver business (40% of sales) levered to high-speed Ethernet connections between servers and switches in data centers," BofA said.

The firm upgraded Coherent to buy from neutral and lifted its price objective to $75 from $65

Shares of Coherent were up 5.6% in recent trading.

Price: 66.86, Change: +3.52, Percent Change: +5.55