Corning displays may see holiday boost
Demand for the company's LCD glass should rise, led by increased panel utilization rates in Korea, as inventory contraction ends.
In the last quarter, Corning's display technologies sales witnessed a 7% sequential and 26% year-over-year increase while pricing pressures remained. The display industry faced an unusual market dynamic this year in which retail demand for LCD products was stronger than actual LCD glass demand.
Actual demand for Corning's LCD glass should increase, led by increased panel utilization rates in Korea as inventory contraction ends. In the LCD market, Corning mainly competes with Asahi Glass, Nippon Electric Glass, and Avan Strate. (See our previous post: Corning warns of slowing LCD demand in second half amid economic malaise.)
We have a $16.53 Trefis price estimate for Corning, and our price estimate is about 8% ahead of the market price.
See our complete analysis of Corning
Significant seasonal retail demand
The fourth quarter normally sees higher retail demand for LCD products, especially in Korea, due to the holiday season. This will increase the utilization rates of Korean panel-makers. Combined with low levels of inventory at panel makers presently, this will increase the demand for Corning's LCD glass, helping it regain some market share it lost in the previous quarter.
We believe that as the industry supply chain ends its contraction, the actual demand for Corning's LCD glass will continue increasing more in line with the growing retail demand for LCD products.
Threat to consumer and business sentiment
But in spite of growing retail demand for LCD products, the worsening global economic environment continues to threaten growth going forward. Recently, the Federal Reserve reduced its forecast of U.S. economic growth over the next two years. Also, Greece is opting for a referendum on its bailout package, which increases the threat of the country defaulting and exiting the eurozone. Such an event can lead to contagion spreading to other highly indebted eurozone economies such as Spain and Italy.
The spate of negative economic news can lead to further worsening of consumer and business sentiment going forward, which will directly effect the demand for LCD products and lower utilization rates.
You can drag the trend lines in the modifiable chart above to see the impact of these trends on Corning's stock value.
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