Corning Incorporated (NYSE: GLW) is a $38 billion business specializing in glass and ceramic-related technology. Its products are used in everything from flat-screen TVs, smartphones, and sensitive sensors for drug research, which might not seem that exciting, but don't be put off. At a time when investors are focused on finding anything artificial intelligence (AI) related, funnily enough, that's exactly what Corning's got going on.
Having watched its stock trend down to 45% from 2021's peak to November of last year, the New York-headquartered company has changed the narrative completely. It started, like with almost all equities, when the first signs of the Fed's victory over inflation started appearing towards the end of last year. Cooling inflation eventually means cooling interest rates, which in turn means cheaper money to fund growth and expansion.
While it momentarily returned to 1999 levels, this market-wide shift in investor sentiment turned Corning stock around and sent it trending up. Its shares have gained some 75% since then and are within a 5% move of topping 2021's multi-decade high.
Corning's Bullish Update: Strong Earnings and Upgraded Guidance
Much of these gains came on the back of solid if not a bit boring, good old-fashioned work. April's earnings report topped analyst expectations for both headline numbers, and a couple of analyst upgrades and boosted price targets in June helped push the stock even higher.
But the catalyst for the latest move, 16% this week so far, is the company's own updated forward guidance. While Corning shares had been cooling somewhat into the first week of July, Monday's update was enough to get them fired up again.
For the current quarter, Corning is now looking for its core sales to land around $3.6 billion, up from its previous estimate of $3.4 billion. On the earnings front, it's good news, too, as Corning is expecting its earnings to land at the high-end of the previously guided range of $0.42 to $0.46 per share. Considering last quarter's revenue came in around $2.9 billion, this would be Corning's first year-on-year revenue increase in years. This would be a solid statement to the market while justifying investors' bullishness in the stock over the past nine months.
AI Adoption Fuels Corning's Positive Outlook
But what was arguably the most interesting part of the update, and what has potentially fueled most of this week's push, was the reason for the bullish outlook. As Corning's CEO Wendell Weeks said, "The outperformance was primarily driven by the strong adoption of our new optical connectivity products for Generative AI. These results reinforce our confidence in 'Springboard'—Corning's plan to add more than $3 billion in annualized sales in the next three years as cyclical factors and secular trends combine."
Considering Corning is a 173-year-old business that is still headquartered in the small town it was founded in upstate New York, this was arguably the most exciting update from leadership in years. The team at HSBC immediately upgraded their rating on the stock, while the likes of Morgan Stanley, Deutsche Bank and Argus all upped their price targets.
Strategic Timing: When to Invest in Corning's AI Growth
Argus in particular made a statement with their street-high price target of $50, which, even including the move so far this week, points to further upside of some 12%. Notably however, this would also mean that Corning shares are at their highest level since the Dot Com bubble.
Investors should look for the stock to continue building on its gains into the end of the week, with any close above $47 confirming that the next phase of the rally has begun. The last time Corning broke through a historic all-time high, it went on to add another 30% of gains fairly easily. Who's to say that won't happen again this time?
