UBS upgrades this materials stock to Buy on strong AI-driven fiber growth

Investing.com -- UBS upgraded shares of specialty glass maker Corning (NYSE:GLW) to Buy from Neutral, citing accelerating AI-driven fiber demand that is expected to power growth across its Optical Communications business.

The bank lifted its price target to $84 from $65, implying about 25% upside from current levels.

UBS analysts said they “see ongoing AI-driven fiber growth continuing to exceed market expectations, driving sustainable higher growth and re-rating in the stock.”

They forecast Corning’s Optical unit to deliver a roughly 27% sales compound annual growth rate (CAGR) through 2027, with 2027 revenue estimates about 18% above consensus.

This segment, which contributed just 15% of profits a decade ago, now accounts for about 40% and is projected to exceed 50% in the coming years.

UBS estimates that of the ~$2.4 billion in earnings growth between 2024 and 2029, about $2.1 billion will come from Optical, underscoring the shift away from Display as the main profit driver.

It highlights that data centers built on Nvidia’s new 72-GPU Blackwell architecture require about four times the fiber content of the prior Hopper generation, and future platforms could drive even greater density.

The bank estimates Corning’s adjusted EPS will grow at a ~20% CAGR through 2029, a sharp step up from its historical mid-single-digit (MSD) pace. Forecasts now call for EPS of $3.05 in 2026 and $3.65 in 2027, both above consensus.

Beyond fiber, analysts pointed to growth opportunities in solar, specialty glass, and automotive. They expect solar to add about $1.5 billion in sales by 2028, supported by long-term contracts.

Meanwhile, cold form glass for cars and triple-pane windows for housing represent incremental drivers.

The team noted Corning has secured 80% of restarted U.S. solar capacity over the next five years, creating a potential $1.5 billion sales lift at margins at or above the corporate average.

UBS also modeled free cash flow of roughly $1.6–2.0 billion annually in 2025–26, leaving $0.5–1 billion per year available for buybacks or growth capex even after dividend payments.

Valuation was another factor in the call. UBS raised its next twelve months (NTM) EPS estimate to $3.35 and applied a higher 25x multiple, more in line with AI-linked industrial peers.

“With adj EPS growing at a structurally higher rate of ~20% vs ~MSD% historically, we see a re-rating in the stock as sustainable, and expect the stock to compound with continued earnings growth,” analysts led by Joshua Spector said.