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Why Corning Incorporated Shares Will Fly to $25

By Brian Pacampara – Mar 26, 2014 at 10:37AM

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Does this analyst make a good case? Or is it just more noise from Wall Street?

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 (GLW 2.95%) 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. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Corning. The Motley Fool owns shares of Corning. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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