Why Corning Incorporated Shares Will Fly to $25

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Corning Incorporated (NYSE: GLW  ) gained about 2% today after Susquehanna upgraded the specialty-glass-and-ceramics giant from neutral to positive.

So what: Along with the upgrade, analyst Mehdi Hosseini boosted his price target to $25 (from $15), representing about 25% worth of upside to yesterday's close. While contrarians might be turned off by the stock's strength in recent months, Hosseini's call could reflect a strengthening sense on Wall Street that Corning's prospects give it plenty of room to run.

Now what: According to Susquehanna, Corning's risk/reward trade-off remains particularly attractive. Hosseini said:

We argue share appreciation the past 6 months has had more to do with accelerated buy backs. And, improving fundamentals should help with more upside from here especially as earning power improves (fueled by a multi-yr TV replacement cycle, margin expansion) while there is incremental confidence on FCF margin of 15-20%. The glass industry could also consolidate given poor balance sheets among competitors, helping with multiple expansion.

When you couple those tailwinds with Corning's still-cheapish forward P/E of 12, it's tough to disagree with Susquehanna's upgrade. 

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  • Report this Comment On March 26, 2014, at 11:39 AM, Fool4West wrote:

    ...phones, tablets, monitors, TVs, fiber optics, autos, buildings, and, oh, dishware. GLW will continue to Glow and Glow.

  • Report this Comment On March 26, 2014, at 12:16 PM, myreferenceframe wrote:

    The time to buy GLW was when it was in the $11-$13 range not too long ago. It's fully valued at $20. Buyer beware.

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