We have been bullish long term on Corning (GLW) since we last wrote about the company in February. Back then it was trading at $13.75. There has not been much change as today it trades at $13.90. We were looking at a bearish pattern that the stock appears to have broken out of. The downward trend was broken about mid March. Now it looks like the 200-day MA is a resistance level that the stock is attempting to push through with nice support at about $13.75.
Recently Merrill Lynch upgraded Corning to "buy" with a price point of $16. This is fairly significant. It attributed this to Corning's relationship with Sharp Corporation (SHCAF.PK) in Japan.
Back at the end of 2007, Corning announced that it would co-locate a glass manufacturing facility at a Sharp Corporation plant in Sakai City, Osaka. The company would be the first manufacturer of Sharp's TFT-grade Gen-10 substrates. These would be the largest LCS glass substrates available and they would use Corning's EAGLE XG glass.
This was a five-year investment project and the five years are up. Time to make money! Corning will provide 100% of the glass for the facility and 60% of Sharp's overall need for it.
With an improving economy, the LCD business (that has been fairly sequestered by poor sales) should start improving. A boost in this plant has also come by an influx of money from a joint partnership with Hon Hai out of Taiwan. It has invested $0.8 billion into the plant. It is attempting to position itself against Korean competitors like Samsung. This influx will greatly help Corning after a dismal utilization of the Gen 10 fab in the past year.
But not everyone is thinking this is true.
Tim Plaehn recently wrote an article on Corning where he stated that the company may lose 25% of its value by mid year. That is a plunge to about 10.4 from its trading point of close to 14 right now. One of his reasons for this position is in reference to this revenue source that has not panned out with LCDs. He writes:
"PaidContent.org recently reported on research from IHS iSuppli that sales of flat screen televisions in the U.S. will decline by 5 percent to 37.1 million in 2012."
This may be true for the United States, but the emerging markets are growing and buying these sets and this is where Corning will prosper in the future. In some places overseas, LCD TV sales have increased by 157% year over year just in February sales. This is showing a larger market and interest overseas than here in the states. This is where we may see Corning's growth in revenue come in. But it may be two more quarters before it shows.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
