Technology sector specialist Mark Mowrey sees upside in two stocks poised to benefit from increased LCD TV sales. Here, the editor of The Prudent Speculator TechValue Report looks at AU Optronics (NYSE: AUO) and Corning (NYSE: GLW).

"Showing big gains in the world of video, LCD TV panel maker AU Optronics reported revenue of $4.5 billion in its first quarter, marking a 12.1% quarter-over-quarter decline that seemed to square with normal seasonality, even as it was negatively affected by the weaker U.S. dollar.

"Earnings thus came in at $1.12 per U.S. ADR, vastly improved from the loss of $0.02 per ADR in the same quarter last year. Looking forward, management says sales of TVs yet have not been impacted by the slowdown, though they are cautiously watching the markets for signs of weakness.

"Pleased with the positive report, we remain buyers of the shares, which trade at just about 6 times the consensus average for earnings per ADR now showing on Reuters Estimates.

MOST NOTEWORTHY: AU Optronics, General Steel and Sequenom were today's noteworthy initiations:

• Jefferies initiated AU Optronics (NYSE: AUO) with a Buy rating and $25 target and believes LCD trends will be healthy in 2008 despite a soft economy.
  
• General Steel (NYSE: GSI) shares were started at Merriman with a Buy rating, as the firm believes strong demand for steel in China should last for years and finds the valuation attractive at current levels.
  
• Cantor believes Sequenom (NASDAQ: SQNM) is positioned to establish sustainable market leadership as a provider of genome analytical products and molecular diagnostics. Shares were assumed with a Buy rating and $12 target.

OTHER INITIATIONS:

• UBS initiated Altria Group (NYSE: MO) with a Buy rating and $30 target.
  
• Canaccord Adams assumed Drugstore.com (NASDAQ: DSCM) with a Buy rating and $3.50 target.
  
• Goldman Sachs initiated DirecTV (NASDAQ: DTV) with a Buy rating and $30 target.

Corning Inc. (NYSE: GLW) shares are rising today after Taiwanese LCD manufacturer AU Optronics (NYSE: AUO) said this morning that there could be a global supply shortage of LCDs next year as more consumers want to buy LCD televisions. An official with AU said supply is expected to grow by 22-25% in 2008, while demand could increase by 28-30%. GLW should also be a beneficiary of increased demand for LCDs. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GLW.

After hitting a one-year low of $18.12 in January, the stock hit a one-year high of $27.25 in July. GLW opened this morning at $24.34. So far today the stock has hit a low of $24.03 and a high of $24.41. As of 11:20, GLW is trading at $24.31, up 38 cents (1.6%). The chart for GLW looks neutral and improving, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just 5 months as long as GLW is above $20 at May expiration. Corning would have to fall by more than 17% before we would start to lose money.

GLW hasn't been below $20 since last January and has shown support around $23 recently. This trade could be risky if consumer spending on luxury items like LCDs tails off in the coming months, but even if that happens, this position could be protected by the support the stock might find around $22, where it bounced in November.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in GLW or AUO.

MOST NOTEWORTHY: Wynn Resorts (WYNN), Las Vegas Sands (LVS) and Sprint Nextel (S) top today's list of downgrades.

• Wynn Resorts Ltd. (NASDAQ:WYNN) and Las Vegas Sands Corp. (NYSE:LVS) were downgraded by Stifel, Nicolaus & Co. to Hold from Buy on valuation.
• A.G. Edwards downgraded Sprint Nextel Corp. (NYSE:S) to Hold from Buy on valuation. The firm said shares are nearing their $21 target and they highlighted low subscriber additions and high churn remains as contributing factors.

OTHER DOWNGRADES:

• AU Optronics (NYSE:AUO) was downgraded at Deutsche Bank to Hold from Buy. The firm lowered its estimates to reflect earlier-than-expected weakness from both LCD TVs and LCD monitors, and it believes shares will be range-bound with the company's weaker earnings outlook.
• Finally, ThinkEquity downgraded RightNow Technologies, Inc. (NASDAQ:RNOW) to Source of Funds from Buy citing recent executive losses and competition ahead of the important 2007 product cycle.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).