BofA Slashes Corning To Underperform; 4K TV, Autos Aren't Catalysts

In a report published Monday, BofA Merrill Lynch analyst Wamsi Mohan downgraded the rating on

from Neutral to Underperform, while reducing the price objective from $25 to $16. Corning is unlikely to achieve its target of flat display profitability in 2015 in the wake of a worse-than-anticipated PC slowdown, decline in the growth expectations of TV OEMs and TV data points turning negative. Other factors that could restrict the company from achieving this target include weakness in the supply chain industry and the relatively high inventory levels at the end of 1Q. Analyst Wamsi Mohan pointed out, "4K TV adoption is increasing," but the magnitude is not expected to be "significant relative to the size of non 4K TVs that consumers would have bought anyway." In the report BofA Merrily Lynch noted, "Although Gorilla glass will have favorable volumes relative to new smartphone launches and the larger screen iPad due later this year, we do not see any meaningful contribution from automotive thus driving modest improvement from better GG3 pricing. Given the weaker economic outlook, we are modeling more cautious outlook in Silicones although polysilicon (hemlock) remains likely on target." The EPS estimates for F15 and F16 have been reduced to $1.43 and $1.46, respectively, to reflect lower volume growth and the corresponding hit to the company's margins.