Corning Downgraded But Still Worth Buying For The Long Term

| About: Corning Inc. (GLW)
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Corning, Inc. (NYSE:GLW) designs and manufactures specialty glass products which are used in flat screen televisions and many popular tablets and smartphones. Its "Gorilla Glass" is a durable, scratch-resistant glass that is used for display and touchscreens. The stock has been dropping recently due to some analyst downgrades.

On January 17, 2013, RBC Capital downgraded Corning shares from outperform to sector perform and lowered the price target to $14. Just a few days before, analysts at Goldman Sachs (NYSE:GS) also downgraded Corning from buy to neutral and lowered the price target to $14. It seems that analysts are concerned about a variety of issues which include: margin pressures in some of its glass products, high levels of LCD inventory, and challenges from foreign exchange rates.

Investing in Corning has not been too exciting for the past couple of years and that might not change in the near-term, but it seems hard to believe that the shares of this innovative technology company won't eventually be revalued much higher. Wall Street might eventually bid this stock up simply because of the value it offers, or some major outside catalyst could occur such as a takeover of the company. The company could also consider various options including a spinoff of certain divisions that offer higher growth potential.

In June of last year, Corning announced that it developed ultra-slim flexible glass which is called "Willow Glass." This product is so thin and light that it could be used in numerous future applications that require display or touch features. It can also be used on curved surfaces which opens many new possibilities. It is still early to see what could develop from this, but Corning sent samples of this product to its customers which will allow it to head towards commercial use. The company is also considering Willow Glass for use in lighting and flexible solar cells.

Corning has been reporting solid financial results. For the fourth quarter of 2012, it earned $283 million, or 19 cents per share. However, after excluding one-time restructuring and other charges, the adjusted profit was significantly higher at 34 cents per share.

It seems that Wall Street is not giving Corning much credit for Gorilla Glass, Willow Glass and other innovations. The stock looks like a great value for a number of reasons. Analysts expect the company to earn $1.26 per share in 2013 which puts the price to earnings ratio at just 9 times. It also trades below book value which is $14.78 per share. Plus, it has a strong balance sheet with about $6.35 billion in cash and just around $3.4 billion in debt. Corning offers a yield of about 3% which pays investors while waiting for a higher share price. This cheap valuation, solid dividend, strong balance sheet and continued growth potential from innovations like "Willow Glass" makes this a great stock to consider, especially on any pullbacks.

Here are some key points for GLW:
Current share price: $11.98
The 52 week range is $10.62 to $14.58
Earnings estimates for 2013: $1.26 per share
Earnings estimates for 2014: $1.31 per share
Annual dividend: 36 cents per share which yields 3%

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Disclosure: I am long GLW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.