A Clear View of Corning

Every so often, you miss a stock. It happens. You see an interesting company that you mean to circle back to later, and sometimes later might be too late. That happened to me with the shares of the glass manufacturer Corning (GLW). Last November, the stock pulled back 21% and was trading near what we can call its 52-week low, through the clear lens called hindsight. I knew at the time that shipments of personal computers were in trouble amid the shift to tablets and that smartphones were continuing to take share from basic and feature mobile phones. On the downside, there was some question about the outlook for TV shipments. What to do? GLW Daily StockCharts.com View Chart » View in New Window » Well, as you can tell, I didn't do anything, and I put Corning's shares on a watch list. Flash forward to today, and I see that not only has Corning's board recently increased its quarterly dividend -- the second raise in less than a year -- to $0.10 per share, the shares have climbed more than 40% since November. Helping fuel that rally, Corning has been beating estimates and recently caught an upgrade from Barclays, to Overweight from Equal Weight. Since the shares are up that much and are in overbought territory, I'm not ready to jump in and recommend the shares today. But I will keep a closer eye on Corning and do some homework so I can be ready to recommend the shares on a pullback. Some of the drivers remain intact for the shares -- tablets, smartphones -- and in some cases they are getting even better as the screen size in smartphones increases. Corning is also touting its Gorilla Glass 3, which is not only thin and tough but can be used in curved displays, for handsets, tablets, notebook computers or desktop monitors like the ones that house Apple's (AAPL) iMacs. Not content to rest on its laurels, Corning is making further improvements to its Gorilla Glass -- making a non-reflective version to enable users to view mobile screens in bright sunlight and integrating antimicrobial properties into the glass to eliminate bacteria from device screens. Sounds good, right? There is some concern that Apple may be moving from using Gorilla Glass in its iPhones to sapphire crystal glass. Design wins can be a boon if a company wins them, or a bomb for the one that loses out. Designs wins, like rumors, are tricky, so here are some shoulds: Should Apple shift to sapphire crystal glass, one potential beneficiary could be GT Advanced Technologies (GTAT). This could be one to watch on the basis of the eventual design teardown for the next iPhone. Should Corning indeed lose the its iPhone position, odds are it would not be an across-the-board move but a phased one that would begin with the latest and greatest. Given Apple's propensity to keep more recent iPhone models going, this would not result in a cratering in Corning's business. That said, the news would likely weigh on Corning's shares and offer a compelling reason to scoop up the shares. Call me a cynic, but somehow I doubt Corning would bump up its dividend again if it were about to lose a big slug of business. As I mentioned above, Corning's shares bottomed last November and were trading at a dividend yield of 3.0% on a trailing annual dividend of $0.33 per share. With the annual dividend soon to be at $0.40 per share, that would suggest a floor under Corning shares at just over $13, or roughly 15% lower than the current share price. I'd be more inclined to recommend that Real Money Pro subscribers start to add GLW shares below $15, as the risk-to-reward is far better at that price level.

A Clear View of Corning

This is one to watch on a pullback, even considering the Apple risk.

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