Shares of Corning (GLW), still suffering from the company’s cutting its Q3 forecast last week, are getting positive attention from Thomas Weisel analyst Ajit Pai wrote in a note to clients that investor sentiment about glass for LCD panels is too pessimistic, and upgraded the stock to Overweight from Market Weight, with a $20 price target.

As Eric has noted, analysts last week cast doubt on the health of the LCD panel business, citing falling prices for panels. Pai, acknowledging a build-up in panel inventory, nevertheless writes that “While there remains significant uncertainty regarding end market demand for LCD TVs and IT products in the second half of 2008, our analysis suggests that current market perception about the LCD industry in general, and GLW in particular, is more negative than fundamentals.”

Pai notes that panel makers are seeing double-digit sales growth in August, month over month, and “stabilizing” prices. He also foresees a “significant’ expansion of production by the panel makers, which would obviously consume more of Corning’s glass. “[P]anel makers’ capacity expansion
in 2009 (potentially the largest increase in a single year by square footage) appears to remain on track,” writes Pai. Pai is today lowering his estimates for next year for Corning, from $7.1 billion in sales and $1.85 per share in profit to $6.8 billion and $1.72, but says the stock looks compelling at 10 times that $1.72. Pai’s numbers are below the Street’s $6.96 billion and $1.83.

Corning shares are down 32 cents, or 2%, at $16.96.