Universal Display Corporation (NASDAQ: OLED) has had quite a 12 months. Starting in the low $80s in March of last year, it crossed the $200 mark by early February.
Since then, the stock has lost traction, trading around $110. But that’s still about a 35% gain, albeit quite a ride to get there.
Basically, OLED technology is in the best screens, whether its mobile phones, televisions or monitors. They’re expensive to manufacture, which is why they are usually put on electronics firms’ top models.
OLED doesn’t manufacture the screens, but it licenses the technology for making the organic light emitting diode (OLED) screens. And right now, it’s biggest client is electronics giant Samsung. And Samsung’s biggest client at the moment is none other than its chief smartphone competitor Apple Inc. (NASDAQ: AAPL).
Yes, Samsung supplies AAPL with the OLED screens for its iPhone X, as well as its own Galaxy line of phones.
And not all OLED displays are created equal, as was evidenced when Alphabet Inc (NASDAQ:GOOG, NASDAQ: GOOGL) subsidiary Google launched its new generation of Pixel phones. The standard Pixel 2 display was built by HTC and the larger Pixel 2XL was built by LG.
The latter were launched to all sorts of bad press regarding the quality of the display. There’s no telling how much that stumble cost Google in the launch and its long-term reputation in the smartphone business.
On the other hand, OLED has been licensing its technology to Samsung for the iPhone X displays and that’s why this relatively small player has been so prominent in the news.
But weak iPhone X sales has hurt OLED stock, since most AAPL vendors rise and fall on the whim of APPL supply chain decisions. Few iPhone X sales mean Samsung builds up a surplus of screens and OLED gets less business.
Then the most recent piece of news to give a ding to OLED stock was Apple’s announcement at SXSW music and tech festival going on in Austin. It confirmed that has been building its own MicroLED facility, which can produce cheaper screens with almost OLED quality.
This has pushed the stock down to its current levels.
But it’s not all doom and gloom for OLED. As a matter of fact, in late February it announced its Q4 and full-year results, and they were huge.
Total revenue for FY17 was up 69%, and up 55% for the quarter. And that was after the late launch of iPhone X and a weak quarter in iPhone X sales. This means, OLED isn’t completely Apple-dependent.
Operating income more than doubled in the quarter. Revenue from material sales was up 105% and revenue from licensing was up 23%.
Also remember, that be all and end all in OLED isn’t necessarily in phone screens, it’s OLED lights for commercial and residential use for eco-friendly solid state lighting solutions. And its 4,500 patents mean it has the ability to pivot to new opportunities fairly easily.
What’s more, its $5.2 billion market cap means it’s still small enough to be a potential big-premium takeover target by a big electronics firm.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
