Goldman Sachs analyst Brantley Thompson yesterday raised his rating on Corning (NYSE:GLW) to Buy from Hold, asserting that the company “should not only see continued steady top-line growth 12%-15%, but margins should also expand beyond expectations.”
Thompson said that while he missed the 25%-plus move in the stock so far this year, the stock could move up another 23% over the next 12 months; he calls the upgrade a “better late than never move.” His price target is $31.
Thompson says the company’s recently adopted pricing strategy of giving up some market share early in the year to keep prices more stable seems to be working. “Success in the pricing strategy should drive gross margin expansion through 2007 and 2008 as LCD glass price declines are stable and cost per unit of glass continues to fall at 14% a year.”
Thompson adds that “strong demand for optical fiber should help lift the average gross margin in telecommunications.” He sees gross margins rising towards 50% by year end.
Thompson also said the company could resume paying a cash dividend or announce a share repurchase plan later this year.
In pre-market trading, Corning shares were up 32 cents at $25.30.
GLW 1-yr chart: