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Deutsche Bank lifted Corning (NYSE:GLW) to Buy from Hold, lifting its price target on the stock to $38 from $35 per share in a note Monday, claiming it is “turning a corner.”
The firm’s price target represents a potential upside of 20% from its closing price on March 24, with the upgrade based on three factors.
Deutsche Bank analysts believe the company’s first-quarter results will likely mark the bottom, its revenues are “underpinned by secular tailwinds,” and its valuation “appears reasonable with growth set to reaccelerate.”
“We believe 1Q23 results are likely to mark the bottom for both revenues (+yoy growth) and non-GAAP EPS, with improvements in forward periods via positive inflections in key segments including Display and Optical (which collectively make up 55%+ of GLW revenues),” the analysts wrote. “We also see gross margin tailwinds driving a more meaningful EPS ramp in subsequent quarters.”
In addition, they said Corning has well-diversified revenue streams, with exposure to several durable, multi-year secular tailwinds, including fiber rollouts, while the China reopening could result in “incremental tailwinds.”
“Valuation appears reasonable with growth set to reaccelerate,” said the analysts. “When looking at valuation relative to the S&P (given the breadth of GLW’s businesses), GLW has historically traded at a 1x-3x discount vs. the market. For context, shares currently trade at 13.7x 2024E P/E, relative to 16.4x for the S&P.”
“Our $38 price target implies 16x 2024E P/E, which is still below GLW’s historical average, but closer to the market multiple.”
