If you're a Corning (NYSE: GLW ) shareholder, and feeling a bit of neck pain this morning, then that's only to be expected. Recent good news at the company, followed by the sudden emergence of "bad news" yesterday, followed by the near-4% surge in stock price at Corning, could give anyone a nasty case of whiplash.
When Best Buy (NYSE: BBY ) highlighted its strong LCD TV sales last month, fellow Fool Mike Pienciak called this "good news" for the LCD glass manufacturer. When Target (NYSE: TGT ) said LCDs were one of its sales drivers as well, the bull thesis for Corning got even brighter. Along with Wal-Mart (NYSE: WMT ) and Sears (Nasdaq: SHLD ) , these companies make up the four horsemen of the Big-Boxocalypse in American electronics retailing. It only makes sense that good news for the retailers would be good news for LCD upstream player Corning.
But what does it mean when we learn that somewhere "midstream" in the LCD glass-to-panel-to-set-to-finished product continuum, things are looking more turbulent?
People who live in LCD glass houses shouldn't stow ... panels
Yesterday we learned that LG Display (NYSE: LPL ) -- one of the biggest players in LCD TV-Land -- sees inventories of LCD panels surging toward year-end, and extending into early next year. The observation comes as an especial surprise in light of LG Display's other announcement yesterday -- that it plans to sink as much as $4 billion into a joint venture to build a panel plant in Guangzhou, China.
Why, one might ask, would LG Display decide to expand capacity in the face of a looming supply glut? It doesn't make sense -- until you consider the context:
- Fact No. 1: Panel supplies may rise in the short term, but as LG Display confides, sales are surging too. In fact, the company predicts sales will be up nearly 50% year over year in 2009.
- Fact No. 2: Much of the sales growth is coming from within China itself -- a market far from saturated. LG Display seems to think this trend has legs, and considering that it will take "at least two to three years" to complete the Guangzhou plant, the impact on near-term panel supplies should be, well -- nonexistant.
Foolish takeaway
Short-term, LG Display's comments don't sound particularly encouraging for Corning. Longer term, however, both LG Display's words and its actions in China suggest that LCD glass demand is only going to rise. And that, friends, is great news for Corning.
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