Q: Why are shares of Corning GLW going down so much?
A: Every once in awhile there's a stock that has so many things going in its favor, it's commonly believed it can only go up. Except, it doesn't.
Corning certainly would qualify for a stock that defies all logic this way. The company is the leading maker of glass components used in flat panel monitors and TVs. With Americans expected to be glued to their TVs to watch the Olympics and election coverage, investors may have expected many consumers to upgrade their sets. Meanwhile, the prices on flat panel TVs have been falling, making them more affordable to more people. And lastly, by next year the analog tuners in most older TVs won't work without a special external box. This digital TV switchover, some thought, would prompt consumers to buy new TVs.
But guess what? Corning's stock didn't take off as the bulls expected. In fact, shares of Corning are down 34% this year, which is even worse than the nearly 21% decline by the Standard & Poor's 500.
Precisely isolating why an individual stock might be down in such a short period of time is tricky. Mark Sue, analyst with RBC Capital Markets, explains that there are several issues at play. First of all, some TV makers stockpiled some display panels for a number of reasons. That supply must be used and sold before the TV makers will order more parts from Corning, he says. TV makers may have ordered more displays than they needed, expecting a bigger boom in TV purchases for the Olympics, he says. Meanwhile, the shaky economy may have some consumers holding off big-ticket purchases.
Longer-term, Sue is still positive. After all, only 30% of the TV viewing public have flat screens. But the glut in panels needs to be cleared out before the stock can recover, he says.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at firstname.lastname@example.org. Click here to see previous Ask Matt columns.