Corning stock gets expensive and overbought: will itt crash after earnings?

Corning stock price continued its strong uptrend and is now hovering at its all-time high as it became a big winner in the artificial intelligence (AI) space. This rally may come into question on Tuesday as the company publishes its financial results.

Corning stock price is soaring as the AI hype continues

Corning, the biggest manufacturer of smartphone glass, has surged by over 300% this year, making it one of the best gainers in the stock market this year.

This surge accelerated after all the company inked a major partnership with Meta Platforms, the parent company of Facebook, Instagram, and WhatsApp. This partnership will see it provide optical solutions to its operations.

Still, there are concerns about the company's valuation, which has become extended and much higher than other companies in the industry. 

For example, Corning now spots a forward price-to-earnings ratio of 56, much higher than the sector median of 24. Its forward PEG ratio of 2.50 is also higher than the median of 1.49.

In contrast, NVIDIA, a company experiencing a 70% annual growth rate with a net profit margin of 54%, has a forward price-to-earnings ratio of less than 25 and a PEG multiple of less than 1. In a recent note, JPMorgan analysts said: 

“"We believe investors are increasingly shifting to CY28 outlooks and embedding somewhat blue-sky scenarios for both optical fiber cable/connector pricing and the scale-up opportunity, among other variables, which leaves little margin for error on risks such as on capacity.”

The current Corning stock price is much higher than the average among Wall Street analysts who have set a target of $175, higher than the current $145.

It would make sense if Corning was having strong revenue and profitability growth. However, data shows that analysts expect that its first-quarter revenue will be $4.32 billion, up by 17% YoY. Its annual revenue is expected to be $19 billion, up by 16% YoY followed by $21.7 billion 

The most recent results showed that Corning’s business is doing well, with its Springboard plan expected to accelerate its performance. Its internal plan estimates that Springboard will add $11 billion in incremental sales by the end of $2028 up from the previous $8 billion.

Corning share price technical analysis points to a pullback 

GLW stock chart | Source: TradingView

The weekly timeframe chart shows that the GLW stock price has been in a strong rally in the past few months. A closer look shows that this breakout started after the stock remained inside a narrow range between $41 and $14 for many years. 

As such, the ongoing surge is part of its movement into the markup phase of the Wyckoff Theory. This phase is characterized by higher demand and the Fear of Missing Out (FOMO). 

It is usually followed by the markdown phase, where most to the gains are undone amid panic selling among investors. A good example of this is the ongoing Avis Budget stockcrash, which we predicted recently.

The stock has also become highly overbought ; with the Relative Strength Index (RSI l) and the Stochastic Oscillator continuing rising. At the same time, it remains much higher than the 50-week and 100-week Exponential Moving Averages (EMA), meaning that it may experience a mean reversion soon.

Therefore, while the Corning stock may pop after earnings, these concerns may push it lower in the coming days or weeks. If this happens, the next key level to watch will be at $120, its lowest level in March this year.

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