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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Corning (NYSE: GLW ) slipped as low as 2% on Friday after Piper Jaffray downgraded the specialty glass company from overweight, to neutral.
So what: Along with the downgrade, analyst Jagadish Iyer lowered his price target on the stock from $19 to approximately where it sits now, suggesting that he sees Corning's risk/reward trade-off as rather unattractive. While bargain hunters might be attracted to the stock's recent slide, Iyer cautioned that Corning could actually be a value trap given the numerous headwinds it faces.
Now what: Piper Jaffray thinks Corning shares will be pressured for several reasons:
- No meaningful display product cycle ahead, which in turn tempers glass volume consumption.
- Near term excess panel supply in front of slowing demand, particularly in China, is causing inventory to rise through the remainder of '13 and into early '14, thereby putting a downward bias on glass pricing.
- Stagnating display segment earnings over the next two years ($0.70-$0.80 /yr) suggests the stock could remain a value trap.
With Corning shares trading at a cheapish forward P/E of 10, and sporting a dividend yield of nearly 3%, however, it's hard to believe that those risks aren't already baked somewhat into the price.
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