Why Universal Display Corporation Shares Tumbled Today

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 Corporation (NASDAQ: OLED  ) plunged 10% Monday following reports Samsung  (NASDAQOTH: SSNLF  ) has abandoned plans to build a next-gen OLED television manufacturing facility.

So what: Samsung is currently producing a small number of large OLED panels at an existing facility in its Tanjeong Industrial Complex, and had previously planned to invest in a more expansive facility to expand production by the end of 2014. According to a report from Nikkei Asian Review today, however, Samsung has decided not to move forward with those plans, primarily because of stubbornly low production yields. 

Low yields are preventing Samsung from aggressively reducing prices on its large-screen OLED televisions, the 55-inch version of which currently has a suggested retail price just shy of $10,000. 

Now what: So where does this leave Universal Display investors? First, while this does mean Samsung will focus its large-screen efforts on high-quality LCD TVs for now, note the report also states Samsung is instead "thinking about setting up a new facility to make small and midsize OLED panels for" smartphones and tablets. In short, Samsung isn't abandoning OLED altogether, but rather delaying its large OLED display ambitions as it works to improve its production techniques.

Next, keep in mind drastic yield improvements for the large OLED panels built by competitor LG Display  (NYSE: LPL  ) have allowed LG Electronics to lower the price of its own 55-inch model to roughly $6,000, and further price drops are expected by the end of this year. Less than two weeks ago, LG Display also confirmed it will expand its OLED TV production in the second half of 2014 with the ramp of its own gen-8 production line.

As a result, and with OLED television still in its infancy, I don't think Samsung's decision should be considered a long-term problem for Universal Display.

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  • Report this Comment On May 06, 2014, at 12:09 PM, sidneyleejohnson wrote:

    Yesterday was front running an old story from Jan rehashed through the story yesterday after a giant options synthetic naked short was put in place (2000 contracts total) and Barron's again was either a willing or duped patsy; by allowing itself to be a front for either Asensio himself (as they have repeatedly done in the past) or the likes of him. The same group of media outlets were used as always to leverage the short and distort (SA, Yahoo Finance, TheStreet, and Barrons, and yes even the fool this time around). The stock didn't first trade down on the news it traded down on the manipulation of a giant naked option based short sale followed by the news and then momentum traders decide to follow along and sell or buy at lower prices.. This was classic stock fraud and market manipulation. The shorts have 8 million shares to cover before LG launches oled volume into the stratosphere in 2h 2014 with their 8.5 gen tv oled plant. They have to do something so using 2000 option contracts to generate option maker naked short sales for 200k shares on a thin market along with leaking the so called "breaking" news on smd's slowdown is nothing but a chance for them to cover more of their huge short position. They've been working it down from 15 million shares for several years now and last note used an illegal fake muddy waters twit to try to create momentum on the downside as well. The only folks that should be paying attention to yesterday's antics is the SEC. I hear they are pretty sensitive these days about folks using the options market to create synthetic naked short positions. that is the big white elephant in the room that nobody on fool likes to address but its there and it has everything to do with the market action we see on oled for the last 3 years if not 15.

  • Report this Comment On May 06, 2014, at 12:10 PM, sidneyleejohnson wrote:

    by the way I appreciate your oled coverage as always but there are much more sinister doings here that needs to be addressed.and until journalists are willing to step up and call a horse a horse and blow the whistle on this BS, the SEC isn't likely to take note.

  • Report this Comment On May 06, 2014, at 12:22 PM, showmethemonet wrote:

    Whenever I see folks blaming every drop on black helicopters and blue helmets, I want to sell all my shares and run for the hills. Although I've held this sucker for way more than a decade, so at this point might as well keep holding for the humor value.

    The reason OLED is languishing is Samsung is their only significant customer so far, which exposes investors to a lot of risk. It has been *three years* since OLED did a secondary offering.

    Almost exactly one year ago, the stock took a huge hit after reporting earnings. Symington wrote: "When (not if) economies of scale kick in and other big customers like LG, Sony, and Panasonic come aboard for the long haul, I'm convinced these wild swings will eventually come to an end..."

    Welp, it's 365 days later, and other big customers are still to be found (at the level of a commercial license). That, like blue PHOLED, is always a day away. Or so it seems.

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