Unusual Activity in Corning Inc. Call Options Highlights Its Value

Today, a large number of call options traded in Corning Inc. (GLW) stock. The volume of call options traded was over 73 times the prior number of calls outstanding. Given its underlying value, investors are bullish on GLW stock.

GLW is at $46.73, up +4.80% in midday trading. Moreover, GLW is up 23.8% since Aug. 5, when it hit a recent low of $37.76. This was after the company's positive outlook in its July 30 Q2 earnings release.

The huge call options volume today in GLW stock can be seen in Barchart's Unusual Stock Options Activity Report (see below). It shows that the options expiration period ending Dec. 20 has over 14,500 call contracts traded at $48.00, slightly higher than today's price.

This volume is almost 74 times the prior number of call options outstanding at that strike price. In other words, it looks like some investors are very bullish on the stock. Why is that?

Analysts Raising Their Target Prices

Analysts have been raising their price targets on this materials technology and science company. For example, AnaChart, a sell-side analyst tracking site, reports that the average of 12 analysts who've recently published on GLW stock, is $50.23. That represents an upside of 7.5% from today's site.

Moreover, some analysts have higher price targets. For example, the table below from AnaChart's analysis of GLW analysts shows that one analyst from Susquehanna raised his target price to $55 from $46 after the company's recent earnings release. Two others raised their targets to $51 as well

Note that these analysts have good track records. The Susquehanna analyst has met his price targets 84% of the time. That is a very good record. Others as well have over 80% track records.

What are they seeing in GLW stock?

GLW Looks Cheap

For one, the stock looks undervalued here. For example, GLW has an attractive dividend yield of 2.51% and trades for 23 times forward earnings. That is for a company that says that generative AI is starting to stoke its sales of its new optical AI connectivity products.

For example, here is what the CFO said last quarter: 

"For the third quarter, we expect core sales to grow to approximately $3.7 billion, with continued adoption of our new optical connectivity products for generative AI. We expect core EPS to grow much faster than sales and to be in the range of $0.50 to $0.54. We’re well on our way to delivering our ‘Springboard’ plan.”

As a result, analysts now project sales next year will rise 6.5% to $15.17 billion, up from $14.25 billion this year (which will be 13.2% over last year's sales). This will be fueling an upsurge in the company's earnings, as analysts now project $2.27 in earnings per share next year.

That puts GLW on a forward price-to-earnings (P/E) multiple of just 20x. This could be one reason why analysts are raising their price targets.

As a result, investors are now piling into call options that expire in 72 days (see above). This may be because they continue to expect to see analysts raise their price targets once Q3 earnings are released.

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On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.