Corning (GLW) Tumbles as Barron's Questions Valuation

Traders are selling shares of Corning (NYSE: GLW) today following a bearish piece in Barron's last night. The stock is currently down 4% to $9.76.

The article focuses on Corning's large exposure to the struggling flat-panel display market. While Corning does not directly manufacture any TV's, etc, it is in the line of fire as the company provides glass for such displays, making up about 46% of its sales last year. Sales in this segment of the market fell 50% during Q4.

And considering an extremely uncertain demand landscape for flat-panel devices, prospects for an improvement in this market look concerning. Stretches of demand uncertainty have not went well for Corning in the past. During these times, Corning's customers will either reduce supply, boosting prices, or increase supply, attempting to send prices to a more affordable level. As the Barron's article points out, "neither scenario will make for big profits at Corning" as "the company's margins are tied both to the volume of glass it sells and to the price of the finished goods containing that glass."

Barron's also points out that shares of Corning have risen by about 30% in the last 3 months, compared to a 1% decline in the DJIA. Today's stock price places shares of Corning at a forward P/E multiple of about 17.1x -- a median for the last 5 years. Just a reminder: the average P/E ratio among S&P 500 companies is currently about 8.55x. Yikes.

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