Corning’s (GLW) $6B deal with Meta (META) to supply optical fiber to the latter’s data centers should boost Corning’s optical business significantly, Morgan Stanley said.
Corning shares surged more than 16% on the back of the deal, ahead of the company’s fourth-quarter results, set to be released tomorrow.
“[We] were expecting there could be upward stock movement if there were to be news announcements ahead of earnings,” Morgan Stanley analyst Meta Marshall wrote in a note to clients. “While we thought an announcement could be more definitive on timing of scale-up investment, Corning’s $6B agreement with Meta through 2030 for optical fiber, cable, and connectivity is of significant size for all potential markets (scale-up, – out, -across, but view as primarily scale-out).”
Marshall, who has an Equal-Weight rating and $98 price target on Corning, said that as concerns about power continue to rise, fiber getting closer to compute becomes paramount, with optical fiber solving the density and scale demands. Additionally, Marshall said that the company’s optical business (which accounts for roughly 40% of overall revenue) is only poised to get bigger with this deal.
“Corning mentioned that Meta is currently not Corning’s largest AI customer, but Meta will become the largest AI customer with this deal,” she wrote. “While we had not been expecting a raise to Project Springboard targets on Q4 earnings tomorrow, with the 30% enterprise Optical 23-27 CAGR staying in place given supply limitations, we now see more of an opportunity for the target to be raised to incorporate [the] META agreement.”