Red-hot Corning shares slide on earnings. Why that's a gift to investors

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Red-hot Corning shares slide on earnings. Why that's a gift to investors Published Tue, Apr 28 20263:20 PM EDTZev Fima@zevfima Corning shares pulled back Tuesday despite the glassmaker reporting better-than-expected earnings and announcing two new long-term supply agreements to support AI infrastructure initiatives. The stock's massive advance this year set a high bar for these results, but the long-term story is still intact. Core revenue in the three months ended March 31 rose 18% year over year to $4.35 billion, topping the consensus estimate of $4.26 billion, according to LSEG. The growth was led by its AI and solar businesses. Adjusted earnings per share (EPS) rose 30% to 70 cents, a penny ahead of expectations, LSEG data showed. Shares of Corning fell more than 7% on Tuesday to roughly $156 apiece. At the lows of the day, the stock briefly traded below $150. GLW 1Y mountain Corning's 12-month stock performance. Bottom line We're not at all surprised to see this kind of market reaction Tuesday. It was almost a given considering the incredible run Corning shares had going into the print, up 92% year to date as of Monday's close. It is why we said Monday that anyone who wants to trim the stock should go right ahead. "If you wanted to take profits in [Corning], I would do that," Jim Cramer said on Monday's Morning Meeting, adding: "It's a very overhyped stock at this very moment." Thankfully, the price action on Tuesday is relieving some of that hype. It's a gift for the investors who have yet to start a position in Corning. Corning's results admittedly weren't perfect, so why are we so encouraged? The main reason: The company has finalized two more long-term supply agreements that are "similar in size and duration" to its previously announced deal with Meta Platforms . That agreement, announced ahead of earnings back in January, is worth up to $6 billion through 2030. Corning didn't disclose the names of these two hyperscalers, with CEO Wendell Weeks saying it's up to the customers to publicly discuss their supply-chain commitments. Still, he said, "These deals are very significant, and they share the risk and rewards of the required expansions with our strategic customers." We're pleased to see this structure, which was also used in the Meta deal, because it means Corning isn't taking on all the risk associated with investing in new production capacity. In other words, Corning isn't adding new production lines before a customer has been secured. They're investing with a higher degree of confidence. And that should help quell any investor concerns about the wisdom of capacity expansion. This is a company that clearly learned its lesson from the speculative fiber-optics boom of the dot-com bubble. As mentioned, there was some weakness under the hood, such as a miss on operating margins, and revenue guidance for the current quarter did come in a bit light. Nevertheless, the stock can be bought Tuesday because these deal announcements make it even clearer that Corning is a critical player in the trillion-dollar-plus AI infrastructure buildout. As AI systems become more advanced and society adopts technology like self-driving cars and other zero-room-for-error applications, latency and data integrity will become increasingly important. That's where Corning's optical solutions come into the fold, replacing copper wires as the means to transmit data. Optical technology is more capable of handling the required data transfer speeds and the longer distances that data needs to travel in modern AI data centers. That's how you get Corning's Optical Communications segment rising an impressive 36% year over year in the quarter. There is more to like, though. We're seeing a new growth opportunity emerge in solar, with revenues growing 80% year over year. Though the segment remains small versus Corning's existing optics and other glass businesses, it is becoming an increasingly important part of the company's growth story. The announcement of the two new supply agreements serves to verify and solidify the stock's move this year. Plus, the company's planned investor day next week in New York, where it's going to provide a refreshed multiyear growth outlook, should give the market increased confidence in financial estimates later into the decade. For that reason, we're reiterating our $180 price target, and we do believe investors without a position can start a small one Tuesday. We're keeping our 2 rating for now, though, given there's a long week of earnings ahead, especially Wednesday night when four hyperscalers report (Amazon, Alphabet, Meta and Microsoft). Their results will surely influence how the broader AI trade acts in the coming days. So, for now, we are going to monitor the action and look for more details at next