What happened

Shares of Universal Display (NASDAQ:OLED) plunged as much as 29.5% on Friday, following the release of disappointing third-quarter results. The stock recovered a bit to close at a smaller 20.5% drop.

So what

The researcher of organic light-emitting diode (OLED) technologies saw third-quarter sales rise 26% year over year, to $77.6 million. Adjusted earnings increased 71%, to $0.72 per share. The analyst consensus was looking for earnings near $0.66 per share on revenues in the neighborhood of $91.4 million.

Management also set their fourth-quarter revenue guidance at roughly $245 million, far below the Street's $299 million consensus for the same period. The implied year-end guidance from three months ago had been pointing to approximately $295 million.

Yellow charting arrow crashing sharply downward.

Image source: Getty Images.

Now what

In the earnings call, Universal Display CEO Steve Abramson said that flagship smartphones are launching with OLED screens all over the place, including two OLED-based iPhones this year. The order inflow from smartphone makers wasn't enough to support the company's original fourth-quarter estimates, though.

Abramson expects the smartphone situation to improve in 2019 and beyond, but the short-term pessimism remains. As for big-screen OLED televisions, those TV sets are selling as fast as Universal Display's TV-building clients can build them -- the shortage here is on the supply side. Business will grow in this sector about as fast as LG Display and Samsung can expand their OLED-making factories.

The stock took a drastic haircut due to a basket of short-term concerns, which doesn't come as a surprise. At the same time, the long-term growth prospects for this company still are fantastic. Smart investors might want to pick up a few shares at these deep-discount sale prices.

Anders Bylund owns shares of Universal Display. The Motley Fool owns shares of and recommends Universal Display. The Motley Fool has a disclosure policy.