Granite Wealth Management

Panicking About the Pullback in Corning (GLW)? Don’t.

Corning (NYSE: GLW) reported earnings a few days ago and the report didn’t excite investors. In fact, the opposite reaction occurred. When we wrote about Corning on July 10th and the stock was above $45, we suggested it was likely to be an ongoing beneficiary of the burgeoning AI move.

Thus, the recent knee jerk sell-off in GLW got us to analyzing the earnings trends so far for the 2nd quarter reporting season.

A nervous investor sitting in front of a computer

According to FactSet, earnings have come through swimmingly. Here’s the rundown with nearly half of S&P 500 companies having reported thus far:

  • 78% have reported positive earnings surprises
  • 60% have reported revenue surprises
  • Earnings growth rate for S & P 500 companies is 9.8% year-over-year
  • Earnings guidance for Q3 2024 is split, with 16 issuing positive surprises and 16 issuing negative surprises.

This got us to thinking…

Are CEO and CFO’S attempting to coax analysts into finally coming out of their gloomy bomb shelters by finally cutting back on the sandbagging with regard to forward guidance?

Maybe.

Our observations are that reporting companies are not beating estimates by a large enough margin to result in huge upside pops to the reporting companies. Investors have been conditioned to expect outsized moves after earnings, even employing speculative options strategies to take advantage of anticipated after-hours pops.

Regarding Corning, forget the short-term, earnings based nonsense. Just stick with it and allow its AI story-stock potential to develop. Indeed, here is what we said in that July 10th post about GLW:

“After years of sideways action, this breakout is significant, with a potential Price Objective in the high $70’s.

“If that price target seems aggressive, investors should take a look at a long-term chart of this “old school” company. Many forget it was one of the many story stocks of the late ’90’s internet era, and that the all-time high is will above $100.

I guess what we’re saying is that it appears GLW is taking off as a story stock yet again. That said, the recent straight-line move from October’s bottom does leave the stock very extended. Consider initiating or adding to positions closer to the break out point of in the $36- 38 range — if you get the chance.

Here’s what the Point & Figure chart looks like today:

While others may have panicked at this pullback, what we see on the charts is an orderly retreat back to the support level we suggested just three weeks ago, allowing investors who don’t let own this stock an opportunistic entry point.