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Why Universal Display Shares Recovered Sharply in March

By Lee Samaha - Updated Apr 5, 2021 at 10:43AM

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The market has been having trouble making its mind up about this tech company in recent weeks.

What happened

Shares of OLED materials and technology owner Universal Display (OLED 3.15%) rose by 11.8% in March, according to data provided by S&P Global Market Intelligence. However, the  stock price's upward move during the month was anything but smooth. Universal Display's shares were in free-fall at the beginning of March after the fourth-quarter earnings report it delivered in mid-February disappointed investors. It didn't help that there was a general market sell-off in technology stocks and the technology-heavy NASDAQ index going on at the same time.

OLED Chart

Data by YCharts

So what

With high-growth companies, it's always essential to focus on the long-term growth trajectory. Also, technology investors are often willing to accept that growth rates won't be steady, and that investor sentiment will change over time. Following that line of thought, it becomes easier to understand this company's share price volatility.

In reality, Universal Display's fourth-quarter results were pretty good. Revenue rose 39% to $141.5 million, and management guided toward full-year 2021 sales of $530 million to $560 million, which would amount to growth in the range of 24% to 31%. Indeed, even as the stock price fell after the earnings report, Wall Street analysts were increasing their stock price targets.

A high definition OLED tv.

Image source: Getty Images.

Also, the company's earnings drivers remain in place. Universal Display is set for a strong sales recovery in 2021 as more OLED smartphones and TVs are manufactured. Thinking longer term, Universal Display continues to research and develop blue phosphorescent emitters, which management believes can significantly reduce power usage. The eventual commercialization of that technology could result in significantly increased sales for the company. Also, a new manufacturing process will be available next year that will reduce OLED manufacturing costs, which should result in increased adoption.

All of this points in a positive direction, but when the market sells off, quite often, the baby gets thrown out with the bathwater. 

Now what

Universal Display's stock is likely to continue to be buffeted by speculation and sentiment. Savvy investors should stay focused on whether the company remains on track to hit its full-year targets, and keep an eye out for any developments favorable to OLED adoption and production. This remains an exciting market, and Universal Display is well-positioned within it.


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