Corning Shares Downgraded To Sell By Drexel Hamilton's Brian White

"In our view, Corning's financial engineering with the SCP joint venture acquisition, the Dow Corning divestiture and the amped-up capital return program have blinded investors of the fact that the LCD market remains in a sharp secular decline," White wrote in a note.

The analyst also said the "dead cat" bounce in the LCD supply chain is a "transient event that will reverse itself" in the fourth quarter of 2016 and into 2017.

Related Link: Corning Sees Capital Deployment Of Over $20 Billion Until 2019

White said the LCD glass market accounts for 60–70 percent of Corning's segment profit, making it vulnerable to the demand trends in the PC and TV markets. Both markets are in the red, with PC remaining weak and TV growth will only become more difficult in the years ahead.

"Although LCD glass volume could chip in mid-single-digit growth driven by larger screen sizes, even moderate glass price declines make sales growth nearly impossible as evidenced by the 13 percent decline (or down 8 percent when recasting 2014) in Corning's Display sales in 2015," White noted.

In addition, the analyst sees nothing in the pipeline that can replace the profit impact of display.

On the valuation front, the stock trades at over 16x White's CY16 EPS estimate of $1.28 and up 15 percent YTD. "Delivering 0 percent annual EPS growth (not 'recast') since 2007 with an 8 percent EPS decline in 2015 (or down 1 percent on 'recast' EPS), we believe a 16x P/E is absurd," White highlighted.

White noted that Corning is trading at a healthy P/ E premium to Apple (13x CY16 or 9x ex-cash) that has grown EPS by 39 percent each year since 2007 and reports GAAP EPS.

According to TipRanks, White has a success rate of 57 percent with an average return per recommendation of +8.5 percent. The analyst is ranked 124 out of 3,990 analysts.

At the time of writing, shares of Corning were down 2.76 percent to $20.45. The analyst has a price target of $14.50 on the stock.