The Long-Term Prospects for This Portfolio Name Keep Getting Better
Our thesis is playing out for Universal Display shares, with more road to run.
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*Shares of Universal Display received a price target increase from a Wall Street bull
*The price target rationale matches our reasons for owning OLED shares in the portfolio
*Wider adoption of organic light-emitting diode displays is unfolding, driving demand for Universal’s solutions
*Some prudent register ringing may be on the horizon following the more than 40% move in OLED since late April
The shares of Universal Display OLED, which were on a tear in June, are outperforming the overall market today. The reason for this latest move was the price target increase to $242 from $198 at research firm Needham, which has been bullish on the shares for some time. While the new price target is ahead of our $225 one, the rationale behind Needham’s price target increase is something we’ve discussed with you during the June quarter — Universal Display benefitting from the smartphone refresh cycle and adoption of organic light-emitting diode displays in markets outside of smartphone.
During the first half of 2024, we pointed to the tablet, PC display and automotive interior markets as ones that are coming online following recent announcements from Apple AAPL. More recently, Samsung shared that it sold over 20,000 of its new organic light-emitting diode monitors during their first month on the market. Philips PHG is bringing new organic light-emitting diode gaming monitors to market. Starting in 2025, several European luxury car brands plan to incorporate hybrid OLED technology. And other smartphone companies, such as Oppo, One Plus and Motorola, are incorporating the display technology into new smartphone models.
Third-party forecasts point to:
- Organic light-emitting diode display smartphone volumes rising 21% in 2024
- Organic light-emitting diode TVs are expected to increase 24% this year compared to 2023
- Tablet shipments using organic light-emitting diode displays are forecasted to jump more than 200% this year as a result of growth from Apple and the 13-inch and 11.1-inch iPad Pro models. As we’ve seen the smartphone market, we would not be surprised to see others follow in Apple’s wake.
- Organic light-emitting diode monitors should benefit from the PC upgrade cycle, and unit shipments are expected to increase 80% this year compared to last year.
Also, LG Display shared that it has started to mass-produce tandem OLED laptop panels, the first company to do so. Here, too, we are likely to see others follow, and we’ll be watching product announcements from Dell DELL, HP HPQ and their competitors.
Those figures and the ramp in demand support our bullish stance on OLED shares. We’ll double-check that rosy outlook with monthly revenue reports from Taiwan Semiconductor TSM and June quarter guidance, but as we expected, it's following the same path carved out by light-emitting diodes (LEDs). If that continues, and there is good reason to think it will, it means we will want to be owners of OLED shares as the technology eventually targets the general illumination market. According to Cognitive Market Research, the global general lighting market will be roughly $35 billion this year.
That is the kind of long-term outlook we can get behind, but it doesn’t mean we will abandon managing the position prudently. As we move toward today’s market close, the day’s strength in OLED shares has them approaching 4.6% of the portfolio’s assets. Members should not be surprised if we lock in a slice of the more than 40% gain in OLED shares since late April.
At the time of publication, TheStreet Pro Portfolio was long OLED and AAPL.
