Goldman Sees A Cyclical Bottom In Glass/TV Industry Approaching, Upgrades Corning

Corning Incorporated GLW now faces a cyclical bottoming of the TV supply chain. Goldman Sachs’ Doug Clark upgraded the rating for the company from Neutral to Buy, while raising the price target from $19 to $26.

The TV supply chain approaching a cyclical bottom presents a good time to purchase Corning’s shares, analyst Doug Clark said. He added that apart from a potential upturn in the LCD cycle, “we see a combination of earnings diversification, stable glass price declines, recent FX moves, M&A, and stable shareholder returns as supportive of higher valuation and multiple expansion.”

There is 26 percent upside to the new price target.

Catalysts On The Horizon

Clark expects the LCD cycle to bottom in 1Q16. Additionally, Goldman Sachs’ supply/demand glass model and analysis points towards an inflection in glass de-stocking in the coming quarters, which should result in Corning’s return to y/y revenue and EPS growth.

“Early indicators of a turn in the cycle include below-average supply chain inventory levels and stabilizing panel prices,” the analyst wrote.

Clark enumerated the potential catalysts as:

1. Further M&A
2. The completion of the announced sale of the company’s stake in Dow Corning JV in 1H. This could unlock ~$4bn in incremental capital
3. Adoption of Gorilla Glass for auto, Iris Glass for TVs, and new products in Life Sciences.

“Finally, we expect further valuation support from a 2.6% dividend yield and a commitment to return >$10bn to shareholders through 2019,” the Goldman Sachs report stated.