Why Universal Display Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Universal Display (NASDAQ: OLED  ) got crushed today by as much as 17% after the OLED specialist reported earnings.

So what: Revenue in the first quarter was $15 million, which translated into a net loss of $4.8 million, or $0.10 per share. Both figures either met or beat consensus estimates, which were perched at $14.4 million in revenue and a $0.10-per-share loss. However, investors may have been rattled by margin concerns.

Now what: Universal Display has begun shipping green emitter and host materials, which led to a big jump in commercial material revenues. The challenge was that gross margins on material sales declined from 90% to 76%. Host materials comprised a higher mix at 29% of material sales, which carry lower margins than emitters. Red emitter sales decreased due to cumulative volume discounts, and Universal Display also cited increased raw material costs. Iridium chloride is used in all of the company's emitters, which saw prices go up during the quarter. Fiscal 2013 revenue is expected in the range of $110 million to $125 million, unchanged from the forecast provided last quarter.

Interested in more info on Universal Display? Add it to your watchlist by clicking here.

Universal Display has a powerful patent portfolio behind OLEDs, a technology poised to dominate the displays of the future. Its placement at the center of OLEDs makes the company an underappreciated way to play the enormous sales growth in tablets and smartphones. However, like any new technology, there are plenty of risks to Universal Display. Check out The Motley Fool's premium report on Universal Display, which dives into reasons to buy the company as well as the challenges facing it. For access to this comprehensive report, simply click here now.


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  • Report this Comment On May 10, 2013, at 3:33 PM, sidneyleejohnson wrote:

    You might have mentioned that UDC said that Iridium chloride prices have aleady come back down... or perhaps done some outside research on the price chart for Iridium chloride. Thanks again though.

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