Apple Inc. Provides Another Reason To Own Its Stock

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Apple stock - Apple Inc. Provides Another Reason To Own Its Stock

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One of my favorite stocks — Universal Display Corporation (NASDAQ:OLED) — is getting crushed by the news that Apple Inc. (NASDAQ:AAPL) is developing its own MicroLED displays that will ultimately make their way into both the iPhone and Apple Watch, potentially rendering OLED displays so 1980s.

That’s not good news, considering in November I called OLED one of the seven stocks I thought could double in price over the next year.

Swing and a miss.

InvestorPlacec.com’s James Brumley believes that Apple’s move to develop its own screens is not a reason to buy Apple stock if you don’t already own it. There’s a good chance the screens won’t end up in Apple products for a significant period of time, if at all.

“It’s unlikely that Apple would choose to mass produce whatever it comes up with, if it even comes up with a MicroLED screen that’s functional and affordable. Most likely it would outsource the production of the new screens,” Brumley wrote March 20. “Whenever they become available to the masses, the word is that its smart watches will be the first beneficiaries. Putting the technology in smartphones and tablets will likely come later, when the technology has been refined and becomes cheaper.”

Apple’s Move May Be Tough for OLED

So, the benefit to AAPL stock in the near term is negligible. Yet, holders of Universal Display stock have seen the value of their shares cut by a third in 2018, with most of those losses coming in the last month.

As it stands now, Apple uses OLED screens for both the iPhone X and the Apple Watch. Universal Display provides the technology to the display manufacturers, which then supply Apple with screens.

However, if Apple pushes ahead with the MicroLED screens on some or all of its products — a big “if” given there’s no guarantee the company can manufacture the screens at a reasonable price — Universal Display stands to lose business from its existing customers. That could provide a serious headwind to the Universal Display stock price recovering anytime soon.

That’s got to be a tough pill to swallow for OLED shareholders. Apple’s move on this front might just be an act of showing off how smart and innovative it can be when it comes to technology.

So, while Apple plays around with the idea of developing its own screens, OLED stock potentially loses billions more. It’s already lost about $2.5 billion since January 1, making its investment significantly riskier today than at the end of 2017.

Another Reason To Own Apple Stock

As I said earlier, my colleague doesn’t believe the latest news from Cupertino is a reason to own Apple stock, if you don’t already hold it.

He’s probably right.

However, if you don’t own Apple stock, but do own OLED, I believe that completely changes the equation.

The Apple stock price is currently around $174. To get to $1 trillion, Apple stock needs to increase by $23 a share or 13%, a move that could happen before the end of this year.   

By buying Apple, you’re reducing the risk of owning Universal Display while obtaining a small share in arguably one of the great tech companies of any generation.

The best offense is a good defense.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/apple-inc-aapl-stock-another-reason-own-its-stock/.

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