Display technology developer Universal Display (OLED 0.01%) has been good to its investors so far. A $10,000 investment in this stock would have grown to $102,000 over the past 10 years. Another decade like that would make you a millionaire in 20 years, all based on a modest $10,000 original investment.
Does Universal Display have enough rocket fuel for another market-crushing ride? Let's have a look.
The story so far
Universal Display ended the first decade of the new millennium with $15.8 million of annual revenue, negative earnings, and negative free cash flows. Smartphones were a fairly new phenomenon at the time, and it was hard to find an example of Universal Display's OLED technology in the wild. But LG Display (LPL 1.71%) and Samsung Display (OTC: SSNLF) were both building large OLED manufacturing plants, foreshadowing explosive growth in OLED displays.
Ten years later, OLED screens can be found in flagship smartphones of nearly every brand, including the market-defining Apple (AAPL 0.74%) iPhone. The technology has also become a mainstay in wearable computing devices, luxury-grade TV sets, and the instrument panels of high-end cars. Last year's sales added up to $410 million, fueling $140 million of net earnings and free cash flows of $160 million. That's what drove the stock to a 920% return, as detailed earlier.
Today, Universal Display's patented materials and technologies touch one-third of the rapidly maturing smartphone market, but there's a ton of growth left to unlock in other sectors.
"Phones, we believe, are just a preview of what's to come in this new landscape of consumer products," CEO Steve Abramson said in Universal Display's fourth-quarter earnings call.
OLED screens graced 3.3 million TV sets in 2019, which works out to just 1.4% of an annual addressable market of 240 million units. The technology can also be found in approximately 1% of last year's laptops and smartwatches. Abramson says the automotive industry's interest is rising quickly, but OLED screens are still a rarity in this market.
Then there's the lighting market. OLED panels offer extremely efficient light sources in a bendable and rollable format that can be cut to suit any space or design. Universal Display is still in the early stages of commercializing this technology, but the potential market is absolutely enormous.
Finally, the future holds a variety of improved OLED manufacturing processes. Universal Display is putting the finishing touches on vapor jet printing for very large panels and liquid printing (much like the inkjet printer on your desk) for quick completion of more detailed panels. These technologies should drive costs down for the company's OLED manufacturing partners and clients, expanding the addressable market into a more price-sensitive portion of the mainstream.
The final verdict: Sure, Universal Display can be a millionaire-making stock
The plethora of growth opportunities in front of this company point to many years of continued hypergrowth. The coronavirus slowdown of 2020 will look like a minor speed bump along the way.
Don't forget that Universal Display is pouring a ton of resources into its research and development efforts. As revenues continue to scale up, the company now has the resources to expand into adjacent technologies and brand new commercial market ideas. A substantial portion of the company's sales in 2029 may very well come from products and services we haven't even seen yet.
There's nothing certain in the stock market apart from taxes and the wealth-building power of compound returns, but Universal Display stands a good chance of turning that $10,000 investment from 2010 into a cool million by 2030.