Corning could be due for a bounce as the potential for earnings upside enters the realm of possibility, according to Morgan Stanley. Analyst Meta Marshall upgraded the glass materials maker to overweight from equal weight and raised her price target by $3 to $38. Marshall's new target implies a 19.9% upside over Thursday's close. "We now see opportunity for positive estimate revisions over the next twelve months, setting up an attractive risk reward," she said in a note to clients Friday, calling many of Corning's businesses "derisked." Shares rose 3% Friday before the bell. The stock has fallen 0.8% since 2023 began, underperforming the broader market. GLW YTD mountain Corning The company saw broad weakness in its portfolio in 2022 and this year, she said, as some businesses struggled with inventory and other consumer-focused names saw demand slide. But after three straight negative revisions, Marshall said consensus estimates for Corning's earnings are now considered within the realm of being achieved. There could even be future revisions to the upside, she said, given improvement in end markets, price increases helping margins and an eventual improvement in consumer behavior. Corning's valuation also creates an attractive entry point, as Marshall said she expects the rally to the price target once estimates get revised up in the fourth quarter. For the rest of 2023, Meta said the most optionality comes from improvements in the fiber business' order trends. She said the exact timing is uncertain, but a reset consensus creates a better environment with tailwinds from government-funded programs and the shift to the cloud, among others. The company's optical segment could also see at least some recovery later this year after the broader economic state hampered the business in 2022 and so far in 2023, Meta said. Current orders don't accurately reflect the public plans of service providers, she said, meaning there could be more business coming that could in turn boost the stock. Margin upside could come from display pricing heading into 2024, she said, after the company announced a 20% hike to glass substrate products in its display business with negotiations starting in the third quarter. But Marshall said there may not be immediate effect and the ultimate price is still uncertain. However, she said it's likely at least some of the planned price increase takes effect since the glass industry moved out of Japan, which can affect earnings given the foreign currency. Meanwhile, the analyst noted Wall Street is not pricing in the increase into consensus estimates. — CNBC's Michael Bloom contributed to this report.
