Is The Market Pricing Corning Fairly?

by Trefis Team
+1.83%
Upside
33.37
Market
33.98
Trefis
GLW
Corning
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2017 was a strong year for Corning (NASDAQ: GLW), as revenue grew by roughly 8% while the stock rose nearly 35%. The strong growth in the stock price was driven by a string of positive developments, including new orders and investments from existing partners Apple, Verizon, and Saudi Telecom, the announcement of new and innovative products, and robust growth in most of its business segments. We expect another strong year for Corning, driven primarily by robust growth in the Optical Communications, Specialty Materials, and Environmental Technologies segments, slightly offset by a soft performance in Display Technologies.

We have created an interactive dashboard analysis to estimate Corning’s valuation based on its expected revenues for 2018. You can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.

We have arrived at a $31 price estimate for the company’s stock, which is nearly 14% ahead of the market price, based on revenue projections of nearly $11 billion for 2018, EBITDA margin of roughly 27%,and a P/EBITDA multiple of 9x, which is slightly higher than the figure for 2017.

We are upbeat about Corning’s growth prospects for 2018, driven by strong demand for optical fiber products, thanks to increased consumption of streaming and cloud services. The acquisition of 3M’s communication markets business, which is likely to expand both its global reach and portfolio, should provide significant long term growth opportunities. In addition, demand for Gorilla Glass is improving consistently due to increased adoption by Apple, and Corning’s expansion into the automotive and wearables market. Further, we also expect strong demand for Corning’s gas particulate filters (GPF’s) as governments look to tighten emission standards. On the other hand, we expect soft demand for its display technology segment to continue driven by sequential LCD price decline.

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