What happened

Shares of Universal Display Corporation (NASDAQ:OLED) climbed 12% on Wednesday after Deutsche Bank analyst Sidney Ho initiated coverage on the OLED specialist with a "Buy" rating and $135 per-share price target. That's a nearly 22% premium from yesterday's closing price.

To justify his optimism, Ho noted that Universal Display is a "pure play" in one of the market's fastest-growing tech segments. He also argued that investors are underestimating multiple aspects of the company's growth story.

Three jars containing Universal Display's new OLED emitter materials

Image source: Universal Display.

So what

For one, Ho says, the size of OLED displays is increasing -- a likely reference to both larger OLED smartphones from multiple manufacturers, as well as the ongoing ramp-up of OLED TV production from Universal Display customer LG Display. In addition, Universal Display investors can look forward to seeing customers adopt new products, including its new blue phosphorescent OLED emitter materials. If that wasn't enough, Ho also reminded investors that Universal Display is poised to benefit from both the permeation of OLED in the Chinese smartphone market and the widely expected introduction of Apple's first OLED iPhone in September. 

Now what

To be fair, this shouldn't be surprising considering supply chain rumblings have long served as a precursor to the adoption of Universal Display's flagship technology in Apple's most popular product line. On the emitter front, Universal Display also raised eyebrows a year ago by acquiring contract research organization Adesis, then followed by significantly expanding Adesis' available workspace with the goal of fostering its growing OLED material product portfolio.

In any case, Ho concluded that over the longer term, OLED display adoption should accelerate over the next two to three years. And with Universal Display standing tall as a central pillar of that acceleration, I agree that the stock has plenty of room to rise from here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.