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Here's Why Should You Hold on to Universal Display for Now

Zacks Equity Research
Updated

Shares of Universal Display Corporation OLED have been performing well of late. The company's shares have returned 23.4% in the past six months against the industry's decline of 2.4%.

If you haven't taken advantage of the share price appreciation yet, its time you hold the stock in your portfolio as it looks promising and is poised to carry the momentum ahead.

What's Working in Favor of Universal Display?

Universal Display is a dominant provider of OLED technology. The company is expected to benefit from strong end-market demand. New OLED-based product launches from premium handset makers like Apple AAPL, Google, Huawei, Oppo, Samsung, and Vivo are anticipated to enhance order growth rate, in turn the company’s top line.

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UBI market research firm expects OLED lighting market to grow to approximately $1.6 billion by 2020. Increasing adoption of OLED is expected among automotive makers like BMW, Mercedes Benz and Audi.  Per Samsung automotive display market is anticipated to witness a CAGR of 9% from 2018 to 2022. However, the company forecasts automotive OLEDs to grow at a much faster rate over the same period. This provides significant growth opportunities to Universal Display.

Moreover, Universal Display’s patent portfolio strength of 4,700 patents is a key catalyst. Additionally, collaborations with the likes of Princeton University, the University of Southern California, the University of Michigan and PPG Industries will continue to strengthen its patent portfolio in the long haul.

The company reported second-quarter 2018 earnings of 23 cents per share, which beat the Zacks Consensus Estimate by a dime. The figure plunged 76.8% from the year-ago quarter. Although, revenues declined 45.2% to $56.1 million it outpaced the Zacks Consensus Estimate of $48 million.

Universal Display’s solid balance sheet and liquidity position (cash and cash equivalents of $457.4 million at the end of the second quarter) is a positive. The strong cash balance will not only help it pursue strategic acquisitions but also enable it to repurchase shares aggressively in the long haul.

To Conclude

Universal Display delivered a positive average earnings surprise of 72% in three of the last four quarters.

We expect the trend to sustain and drive the overall financial performance of this Zacks Rank #3 (Hold) stock.

Stocks to Consider

Few better-ranked stocks in the broader technology sector are Salesforce.com Inc CRM, and NetApp, Inc. NTAP, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Salesforce and NetApp have a long-term expected earnings growth rate of 25% and 14.13%, respectively.

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NetApp, Inc. (NTAP) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Salesforce.com Inc (CRM) : Free Stock Analysis Report
 
Universal Display Corporation (OLED) : Free Stock Analysis Report
 
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Zacks Investment Research