Corning Still Faces Headwinds, but We See Improvement Progressing Through 2023; Shares Undervalued

We maintain our $40 fair value estimate for narrow-moat Corning shares after the firm reported a solid fourth quarter and guided for a weak start to 2023. Corning is feeling the brunt of another round of disruption due to COVID-19, this time from policy loosening in China that led to rising case rates and weaker consumer demand. Corning’s display, environmental, and specialty materials businesses are all impacted in China. We anticipate 2023 to rebound from a trough in the first quarter and believe Corning is managing its cost structure well in the face of weaker demand. Long term, we maintain our confidence in Corning to benefit from content growth across its end markets and for its moaty centralized cost structure to generate good profitability. We see shares as undervalued.