Corning's Stock Doubles on AI and Earnings Momentum, But Valuation Concerns Intensify

What happened

Corning's stock price surged 115% over the twelve months ending February 2026, driven by strong earnings beats, a significant AI data partnership, and strategic enhancements, even as the P/E multiple declined, indicating earnings growth outpaced market re-ratings. The DeepValue report confirms operational success with record core sales and margins nearing 20%, but highlights a rich valuation of 55x trailing GAAP EPS and 33x EV/EBITDA, embedding optimistic assumptions about sustained AI-driven optical growth and Apple demand. Despite the rally, critical risks persist, including optical segment weaknesses in China due to tariffs, reliance on hyperscaler capex cycles, and forecasted smartphone softness that could pressure volumes. Market sentiment has evolved from a clean upside story to a crowded AI narrative with increased volatility, as recent coverage notes optical shortfalls and execution sensitivity. Investors should look beyond the positive propaganda, as the stock's rise has already priced in much of the growth, leaving limited margin for error against potential cyclical downturns.

Implication

The stock's doubling reflects strong execution, but at 55x P/E, it discounts perfect continuation of AI and Apple tailwinds, skewing risk-reward to the downside given cyclical exposures. Any deceleration in hyperscaler AI capex or smartphone volumes could compress multiples sharply, potentially driving the stock toward the bear-case target of $65. Corning's concentrated customer base and dependence on optical pricing amplify earnings volatility, challenging the sustainability of ~20% margins amid rising competition and tariffs. Investors holding the stock must closely monitor quarterly results for signs of margin pressure or optical growth slowing, as early warnings could trigger significant corrections. For new capital, waiting for a pullback to the mid-$60s, as suggested in the DeepValue report, provides a more defensible entry point to capture long-term growth without overpaying.

Thesis delta

The new article reinforces the bull case with the stock's 115% rise, but it does not alter the core thesis that Corning is overvalued and at risk of a sell-off. The DeepValue report's 'POTENTIAL SELL' rating remains intact, as the rally has further stretched valuations without mitigating cyclical dependencies or optical segment headwinds. Investors should treat positive news as already priced in and focus on downside risks, maintaining a cautious stance until valuation aligns with normalized earnings power.