After hitting a 52-week low of $11.51 on 4th October, Corning stock rebounded rapidly through the beginning of last week. Over the five trading sessions since Wednesday last week, the stock remained largely flat – though volatile – on noise around Apple’s plans to invest in a Sharp LCD plant to diversify its customer base.
Earlier last month, Corning management reported that sales can drop sharply in the second half of the year due to lower-than-expected LCD panel maker utilization rates and some market share loss. We wrote in this in our previous post: Corning Warns of Slowing LCD Demand in Second Half Amid Economic Malaise.
Earlier this month, management signaled a positive long-term future of the company by raising dividends by 50% to 7.5 cents per share, representing the company's first increase in five years. Moreover, the company signaled that the shares were heavily undervalued by announcing that it will buy back up to $1.5 billion in common stock over the next 15 months. This news has supported shares over the last two weeks.
Early last week, Corning’s stock then slumped as reports surfaced that Apple may invest in Sharp LCD plant in an effort to diversify its supplier base. Samsung Electronics is one of Apple’s key suppliers, but the two companies have been engaged in several patent disputes of late. Samsung happens to be Corning’s key partner, and their joint-venture Samsung Corning contributes more than 47% to Corning’s stock price, as per our estimates.
Apple’s effort to diversify its LCD supplier base could therefore result in a substantial loss of revenues for Samsung Corning, hurting Corning’s stock in the near-term. But in the long-term we believe that Corning’s Gorilla glass sales will continue growing rapidly along with improving sales of its clients such as Samsung, Sony, Dell, HTC and LG, who continue using the product in their smart-phones.
In the long term, we expect Corning’s revenues to continue increasing as the company continues to invest in newer technologies and because many of Corning’s existing products are linked to fast-growing technology products such as LCD displays, mobile devices, fiber optics, and clean diesels.
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