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Universal Display Corporation (OLED) Plunges 15% on Earnings Miss; Oppenheimer Comments


Universal Display Corporation (NASDAQ:OLED) shares are trading off 15% in Friday’s trading session. Why? The light-emitting diode maker introduced 2018 revenue guidance of $350-380 million, which was lower than consensus estimates of $398 million. To the company’s credit, 4Q revenue and EPS of $116 million and $0.93, topped consensus estimates of $100 million and $0.85, respectively.

OLED CFO Sidney D. Rosenblatt said, “We are pleased to report stellar fourth quarter and full-year results […] From record-high revenues, to a multitude of new agreements and new OLED consumer electronic products, to approximately doubling our production capabilities at PPG Industries, 2017 was filled with tremendous growth. The dynamic OLED market is growing, and as a key innovation partner to the world’s leading OLED display and lighting manufacturers, we believe that we are well-positioned to participate in the vast opportunities ahead.”

Rosenblatt continued, “We are excited and confident of our upward trajectory in this multi-year OLED capex growth cycle. After an extraordinary year-and-a-half of new capacity installs, we expect industry capacity growth to take a bit of a breather this year as panel makers build the framework for the next wave of high volume OLED production, which is expected to ramp next year. 2019 is poised to be a meaningful year of growth. Based on current production timelines, we estimate the installed capacity base, as measured in square meters, will increase by approximately 50% over the next two years.”

Oppenheimer analyst Andrew Uerkwitz commented, “Longer term, OLED market outlook remains robust with expansion for both large- and small-sized displays. There is a lot to like about the secular growth story, but we stay sidelined on valuation and near-term uncertainties regarding revised revenue recognition method.”

“We expect more volatile mobile display market dynamics in 2018 due to competition from lower cost LCD. Additionally, new accounting rules will compound the complexity in revenue estimates by management and the Street,” the analyst added.

As such, Uerkwitz reiterates a Perform rating on OLED shares, without suggesting a price target. (To watch Uerkwitz’s track record, click here)

Out of the 11 analysts polled in the past 12 months, 6 rate Universal Display Corp. stock a Buy, while 5 rate the stock a Hold. With a return potential of 36.5%, the stock’s consensus target price stands at $176.75.