Apparently, there’s a shortage of glass.
Not just any glass: There is a supply crunch in the high-tech glass that
(ticker: GLW) produces for video displays, mobile phones, automotive products and other specialty applications. One reason is the recent power outage that damaged manufacturing equipment at a Japanese factory of Corning rival
Nippon Electric Glass.
That may become a problem for consumers, who could see prices increase for some electronic products amid tight supplies. But it is good news for Corning. Citi analyst Jim Suva has reiterated his Buy rating on the company, lifted his target price to $42, from $37.50, and set a “Catalyst Watch” on the stock, implying potential for a near-term rally.
“While Corning shares have rallied, we believe that a ‘stronger for longer’ consumer trend augurs well for underlying demand drivers in Corning’s business segments exposed to consumer electronics, with further tightening in the glass supply demand environment due to outages at a major competitor,” he wrote in a note this week.
Suva noted that the near-term supply disruptions “augur well for the display segment,” from which Corning generates about 30% of its revenue and 40% of its net income. “We also expect recovery in the auto segment to benefit growth in the environment segment group (gas particulate filters) throughout 2021,” he wrote.
And while the company’s optical networks business remains lumpy, he wrote, there are signs that both telecommunications companies and public cloud providers are spending more money, suggesting a pick up in fiber optic deployments in the 2021 second half.
He highlighted other positive long-term trends, including growth in auto glass demand and growth in demand for the company’s Valor glass for vaccine storage. And with significant free cash flow likely in 2021, he added, Corning is likely to resume stock buybacks.
Suva’s Corning call was part of a larger review of the telecom and networking hardware group. In the same report, he named
(KEYS) as his top large-cap pick and
(CIEN) as his favorite mid-cap stock. Suva also downgraded
(COMM) to Sell from Neutral, lifting
(INFN) to Neutral from Sell. He was wary of the large networking equipment players, keeping his Neutral ratings on
(ANET), while maintaining his sell rating on
Despite the bullish call, Monday’s broad-market decline helped drag down Corning shares by 1.5%, to $35.69.
Write to Eric J. Savitz at firstname.lastname@example.org