Goldman Sachs' 4 Reasons Why Corning Is No Longer A Sell

Corning Incorporated GLW, best known for inventing the first low-loss optical fiber decades ago, should no longer be sold by investors for four key reasons, according to Goldman Sachs.

The Analyst

Goldman Sachs' Rod Hall assumed coverage of Corning and upgraded the stock from Sell to Neutral with a price target lifted from $26 to $29.

The Thesis

Corning's stock was added to Goldman Sachs' "Americas Sell List" in mid-August 2017 and has since lost 0.4 percent versus the S&P 500's 12.1-percent gain, Hall said in a note. (See the analyst's track record here.)

The bearish case for Corning's stock has come to an end for four reasons, the analyst said: 

• The company is likely to improve its gross margins in the bottom half of 2018 from a combination of higher utilization and fixed cost absorption from seasonally higher revenue, fleet optimization and a more favorable sales mix.
• Consumers are buying more TVs as retail prices drift lower, which is a "significant positive" for Corning's Display segment, which boasts a gross margin rate that is higher than the company average.
• Corning historically benefits from one-time customer deposits and this should continue ahead of the Gen 10.5 ramp.
• Shares of Corning are trading at a "fair" valuation at 15 times NTM PE, which is in-line with the stock's three-year average and a price-to-book ratio of close to 2 times.

Price Action

Corning shares were down 0.81 percent in premarket trading Thursday at $24.40. 

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Photo courtesy of Corning.