shares were sagging Friday after J.P. Morgan analyst Samik Chatterjee cut his rating on the specialty glassmaker to Neutral from Overweight, while keeping his $39 price target on the stock.
Chatterjee writes in a research note that the Corning (ticker: GLW) downgrade reflects his view that further improvements in consumer-end markets—including mobile phones, flat-panel televisions, and automotive applications—will be limited relative to the momentum the company has seen in the second half of 2020.
He thinks more moderate upside will “limit enthusiasm for the shares,” which he contends already trade at a premium valuation. Corning has rallied about 30% since mid-July, Chatterjee notes, and now trades for about 19 times the next 12 months’ earnings. He says he would be more comfortable with a range of 15 to 17 times.
The analyst says that Corning faces much tougher comparisons in the second half of 2021 as a result of the recent pickup in business.
“We expect investor upside expectations relative to Valor [specialty glass used in the pharmaceutical industry, in particular for storing vaccines] and Auto Gorilla Glass [used for windshields] to be only realized in the medium- to long-term,” he writes. “The shift in catalysts from near- to medium-term in combination with the recent share price appreciation, drives us to downgrade.”
Corning on Friday was off 3.2%, to $35.99.
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