Morgan Stanley: Display Environment Remains Healthy, And Corning Believes It Can Continue

In a report published on March 4, Morgan Stanley analysts maintained an Equal Weight rating on

, with a price target of $19, after a meeting with CFO Jim Flaws to understand why the company believes the current healthy display demand environment would continue. While there was a slowdown in the pricing declines in the display business in FY14, the company witnessed growing volume demand. These factors combined to create "one of the strongest display markets in recent memory," the analysts said. The company has remained optimistic about the pricing environment into Q1."Thecompany does not expect disruption to this healthy market to come from the supply side, as prudent forecasting and inventory levels by substrate and panel makers have generally supported healthy profits at panel makers, keeping moderate pricing pressure on substrate producers," the analysts added. Any disruption that may be witnessed would probably come from the demand side. This may not be due to the current replacement cycle, but on account of "a more general economic slowdown." The company refrained from details of its Chinese New Year sales, while indicating that they could be in-line. The company spoke about why the 4K replacement cycle appears to have depth. "The company has observed that as TV's have moved from CRT (e.g. tube) to LCD, replacement cycles have shortened from 8-10 years to 6-8 years. With there being ~400mm LCD TV's that are older than 6 years old (as part of 1.7bn overall flat screen panels), the company believes that the industry is at the early stages of upgrading not only the 400mm LCD panels to 4K, but the remainder of the 1.7bn flat panels that continue to age," the analysts wrote. Although 4K content lags still, "attractive price points (particularly at larger sizes) are causing customers to invest in these TV's as they replace their own sets in order to future proof their purchase," the analysts added.