Corning (GLW) has been one of the most frustrating positions in my portfolio since early in the year. It is selling just over where I originally acquired the shares in January despite sporting cheap valuations and a solid dividend. With the dividends and option premiums I have received (expired covered calls), I am up decently on the position but the stock is still selling below what I would consider its fair value. However, the stock has a nice 15% move over the last month and is starting to acquire some positive catalysts. It could be in the early innings of a significant rally.
Recent positives for Corning:
- Goldman Sachs upgraded the stock to "Buy" and raised its price target to $16 from $14 a share.
- Barrons also had another positive piece on the company in this week's magazine.
- After falling for months, consensus earnings estimates for both FY2012 and FY2013 have stabilized in the last month.
- The rollout of Apple's (AAPL) iPhone 5 should be a positive for Corning's Gorilla Glass and is one of the reasons analysts are calling for 7% revenue growth in FY2013 after flat sales in FY2012.
"Corning Incorporated produces specialty glasses, ceramics, and related materials worldwide. The company operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences." (Business description from Yahoo Finance)
4 reasons GLW still has upside at $13 a share:
- The company's balance sheet has over $3B in net cash on the books (15% of market capitalization) and yields 2.3%.
- In addition to Goldman Sachs, Oppenheimer also upgraded the shares to "outperform" in the last month.
- The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
- The company has increased operating cash flow 70% in the last three years and the stock sells for just 6 times OCF. GLW sells for less than 8 times forward earnings subtracting net cash.
Disclosure: I am long GLW.
