Should You Pick Corning Stock After 40% Gains This Year Amid AI Boost?

Core Viewpoint - Corning Incorporated (GLW) has revised its Q2 2024 outlook positively due to increased demand for its optical connectivity products, particularly for generative AI applications, leading to a 10% rise in its stock price over the past week [1]. Financial Performance - GLW's Q2 sales are now expected to be $3.6 billion, up from a previous estimate of$3.4 billion, with adjusted earnings per share projected to be at the higher end of the earlier range of $0.42 to$0.46 [1]. - Over a longer term, GLW stock has increased by 30% from approximately $35 in early January 2021 to around$45 currently, while the S&P 500 has risen about 50% during the same period [1]. Stock Performance Comparison - GLW's stock returns have been inconsistent, with a 3% return in 2021, -14% in 2022, and -5% in 2023, underperforming the S&P 500 in both 2021 and 2023 [2]. - The S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023, highlighting the challenges individual stocks face in consistently outperforming the index [2]. Valuation Insights - Current valuation estimates for GLW suggest it is appropriately priced at $42 per share, aligning with its market price, and trading at a P/E ratio of 22x expected earnings of$1.91 for the full year 2024 [3]. - The 22x P/E multiple is higher than the 18x average over the last five years, but this increase is considered justified due to a rebound in demand for its optical communication business amid the AI boom [3]. Growth Drivers - Corning aims to add $3 billion in annual sales over the next three years, with a rebound in optical communication being a key driver [4]. - The optical communication segment reported sales of$4.0 billion in 2023, reflecting a 20% year-over-year decline due to reduced demand from mobile carriers, but demand for fiber optics is expected to rise as data processing for AI systems increases [4].