We're Boosting Our Universal Display Price Target
We are approaching wider adoption of organic light-emitting diode display technology beyond smartphones.
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* As we approach a tipping point for organic light-emitting diode displays, we are boosting our price target for One-rated Universal Display to $225 from $210
One-rated Universal Display OLED delivered a March quarter earnings beat with revenue rising 26.7% year over year to $165.26 million and gross margins expanding to 78% from 75% in the year-ago quarter. The company’s top line benefited meaningfully from the 33% jump in material sales to $93.3 million in the quarter, confirmation of the growing use of organic light-emitting diode displays.
Revenue from royalty and license fees was $68.3 million in the first quarter of 2024 as compared to $55.2 million in the first quarter of 2023. The increase in royalty and license fees was primarily the result of higher unit material volume, which also speaks to the ramping use of organic light-emitting diode displays.
Management lifted its 2024 revenue guidance to $635-$675 million from $625-$675 million, compared to the $576 million it achieved last year. Backing out the March quarter results, that implies 5%-15% top-line growth in the balance of the year. The combination of Qualcomm’s QCOM guidance for 5G smartphones this year, up high-single to low double digits plus Apple’s AAPL pending iPad launch with organic light-emitting diodes display and competing offers suggest Universal’s guidance is conservative.
On top of that, we are also starting to see greater inroads for organic light-emitting diodes in other applications, including the automotive market. For example, the 2025 Min Cooper EV includes a giant, round organic light-emitting screen. Others expected to do the same include Audi, BMW, Cadillac, Mercedes-Benz, Porsche, and others.
While we don’t want to be Kook-Aid drinkers, we are approaching wider adoption of organic light-emitting diode display technology beyond smartphones. Another positive is the larger format displays compared to smartphones which will drive greater material demand and command higher display prices. That paints a favorable outlook for Universal’s materials and licensing businesses as well as bottom-line growth prospects.
That combination is leading us to lift our OLED price target to $225 from $210 and reiterate our One rating. Approaching the larger tipping point for organic light-emitting diode displays, we intend to be owners of OLED shares. As those adoption rates rise, it will give us reasons to revisit our OLED price target further.
At the time of publication, TheStreet Pro Portfolio was long OLED, AAPL, QCOM.
