Over 30% Rise In Corning’s Stock Possible After COVID-19 Crisis?

by Trefis Team
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Trefis
GLW
Corning
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Corning’s stock declined by about 19% between March 8, 2020, and March 24, 2020 ( vs. a 18% decline in the S&P 500), and the stock is down over 24% since January 31, after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 26% decline in the S&P 500 since then).

Drawing lessons from the 2008 financial crisis, we see GLW stock declined from levels of around $19 in October 2007 (the pre-crisis peak) to levels of around $8 in March 2009 (as the markets bottomed out), implying GLW stock lost as much as 57% from its approximate pre-crisis peak. This marked a drop largely in-line with the broader S&P, which fell by as much as 51%.

Will Corning stock recover similarly from the coronavirus spread?

We compare the performance of Corning vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: Corning Electric Stock Compared With S&P 500

  • In fact, Corning recovered strongly post the 2008 crisis, to levels of about $15 in early 2010, rising by 85% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.
  • Overall, there have been two distinct trends driving the recent sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 30% after Saudi Arabia increased production.

Rationale Behind Stock Decline

  • Industrial companies’ stocks generally move in tandem with the broader market trend and economic growth trends.
  • With the global economy feared to go in recession, the demand for glass products will likely decline. Companies such as Apple use Corning’s glass for their devices, and any decline in Apple’s sales will directly impact Corning as well.
  • Lower consumer spending power, and supply chain issues, will also be a cause of concern in the near term.
  • On the positive side, some of the decline will be offset by growth in sales of notebooks. With more people working from home, there has been a surge in demand for notebooks. Again, Corning supplies glass for notebooks.
  • Lower shipments (due to a fall in demand) is likely to put pressure on the company’s revenues in 2020, which explains the drop in the company’s stock price.
  • We believe Corning’s Q1 and Q2 results will confirm this reality with a drop in revenues.
  • If signs of coronavirus containment aren’t clear by the Q1 earnings timeframe, it’s likely Corning’s stock, along with the broader market, is going to see a continued drop when results confirm palpable reality.

Conclusion

While GLW stock has declined due to the coronavirus and oil price war crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly and potentially outperform as the crisis winds down. Based on 2008 crisis comparison, GLW stock could potentially see an upside of around 30% post the current crisis.

What about timing?

Potential for 30% gains in GLW stock, and its timing, hinges on the broader containment of the coronavirus spread – our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture, and complements our analyses of Coronavirus impact on a diverse set of industrial companies, including Honeywell, GE and 3M. The complete set of coronavirus impact and timing analyses is available here.

 

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