November was nothing short of brilliant for Universal Display Corporation OLED as its shares went up a whopping 50%.
What’s more? Here at Zacks, we have given it a Zacks Rank #2 (Buy). Over the last 30 days, all the 3 analysts covering the stock raised their estimates for the current year to $1.09, up 6%.
And we are pretty sure that December is not going to disappoint either. In fact, it has already started the month on a solid note!
Yesterday, Universal Display shares touched a new 52-week high of $57.1, eventually closing at $55.90. This came after CFO Sidney Rosenblatt presented at the Nasdaq 33rd Investor Program in London.
Why we are Pro-OLED
Universal Display shares are riding on a renewed rumor and management’s comments suggesting that its flagship technology will be used in future models of Apple's AAPL iPhone.
However, we think that there are other factors to consider —
- long-term agreements with Samsung Display SSNLF and LG Display LPL,
- evaluation agreement with China-based display juggernaut, BOE, and
- OLED TVs
First, the long-term agreement with Samsung mitigates investor concerns over lagging growth on a relative basis next year. How?
Since a major ramp up is confirmed in OLED manufacturing capacity in 2017, a lot of investors were expecting 2016 to be dull. However, as Rosenblatt pointed out at the Goldman conference, 2016 will see growth as Samsung & LG — two of the company’s largest customers — will step up their OLED manufacturing efforts.
Second, Universal Display’s evaluation agreement with BOE, signed last year, has solid long-term potential. Rosenblatt’s hint that the Chinese market has much more to offer, added the cherry on top.
Rosenblatt said that Universal Display is communicating with “three or four” more Chinese display producers and, considering the growth of the Chinese electronics market, this is a big plus for the company.
Lastly, a very exciting growth factor for Universal Display lies with the OLED TVs (although there is significantly more hype around smartphones given Apple’s involvement). OLED TVs require a larger volume of OLED emitter materials that can be a big growth driver.
Though LG cut its OLED TV unit sales guidance for this year and the next, Rosenblatt believes that investors need not worry, as LG expects to sell fewer smaller-sized units, and not the larger-sized units.
This is important, as Universal Display's material sales gain comes from the larger size of each display.
Another thing that investors should be positive about is that the price of OLED TVs is declining. This makes them more competitive with high-end LCDs. This will entice consumers to buy OLED TVs which offer better-quality picture and energy efficiency.
Overall, we think that Universal Display still has a lot to offer investors.
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