The economy is showing signs of life, with slowing inflation and resilient consumer spending in October. Downturns don't last forever, and the best time to make investments is when prices are low. So this looks like a good time to put your hard-earned cash to work by grabbing a couple of high-quality tech stocks on the cheap.
The proverbial bull is getting ready for a fresh run. You don't want to be left empty-handed when the market mood suddenly turns optimistic. So let me show you why you should consider grabbing some Universal Display (OLED 1.10%) and Roku (ROKU -10.29%) stock while the getting is good.
Universal Display: A high-def beacon of innovation and stability
When you're looking for long-term investment ideas in an economy burdened by high interest rates, you want to start with a squeaky-clean balance sheet and positive cash profits. Those lofty rates can't hurt a company with zero debt and no particular reason to take on new loans or debt notes anytime soon.
From that starting point, you'll quickly run into Universal Display.
The pioneering developer of technologies for organic light-emitting diode (OLED) panels hasn't been burdened by a penny of long-term debt since 2005, and its cash profits have sprung back to life after a couple of rough quarters. In the recent third-quarter update, Universal Display's free cash flows clocked in at $35 million, or 25% of total top-line revenues.
And this recovery is not all about the smartphone and tablet screens that drove Universal Display's business growth in the past.
- The company's power-sipping display and lighting technologies are perfectly suited for electric vehicles.
- Unmatched contrast and vibrant color in an ultra-thin physical format make OLED TV sets the cream of the crop in big-screen living room entertainment.
- And OLED's ability to produce top-quality images in flexible, transparent, and rollable screens open up a whole new market with no competition to speak of. Wherever the hardware design team wants a digital screen but couldn't make a traditional LCD work, Universal Display's OLED solutions stand ready to occupy that strange space.
At the same time, highly efficient manufacturing options such as organic vapor jet printing can now produce OLED screens with techniques more commonly seen in inkjet printers. The cost of manufacturing OLED panels will plunge as screen-building partners implement these game-changing technologies. After that, you'll find OLED screens and lighting panels all over the place.
The progress toward these growth-boosting research goals wasn't even slowed down by the coronavirus pandemic or the inflation crisis. Universal Display had the luxury of stepping up its research and development budgets even in the darkest days -- thanks to that rock-solid balance sheet and near-perfect history of positive cash profits:
OLED Research and Development Expense (TTM) data by YCharts
That effort should pay off when the global economy gets back on its feet, inspiring consumers everywhere to spend money on electronics featuring OLED panels. Again, it's not just a smartphone opportunity. Universal Display also taps into the electric vehicle surge, the long-term entertainment shift from movie theaters to well-equipped living rooms, and more.
Universal Display's combination of financial health and innovative prowess makes it a compelling choice in this economy. With no long-term debt and a strong focus on R&D, the company is poised to make the most of the next economic upturn. As it expands beyond smartphones into electric vehicles and flexible displays, its financial stability and innovative edge should offer a unique growth story in a recovering economy.
Roku: Simple streaming in a complex world
It takes a bit of advanced geekery to explain what Universal Display does, even if its display technology is found in every iPhone and many mid-range Android phones nowadays. You just don't see the brand of the OLED technology developer on that handset. But Roku is a more familiar household name, so let me keep this discussion short and sweet.
Roku has become a staple among media-streaming platforms, known for its user-friendly devices and user interfaces. This company's strength lies in its visibility and direct connection with consumers. Originally started as the internal hardware division of Netflix (NFLX -0.63%) when that company was exploring digital streams for the first time, Roku was first on the scene and ready to exploit that first-mover advantage.
Here's why Roku stands out in the explosive media-streaming market:
- Ubiquity and ease of use: Roku's devices and platform are known for their simplicity and accessibility, making digital media streaming a breeze for a wide range of users. Nobody can match Roku's sector-founding experience and years of user-friendly interface development.
- Strong market position: As the trend of cord-cutting accelerates, Roku's role as a central hub for various streaming services becomes more valuable. This positioning is key in a market where ease of access to content is king.
- Adaptability and growth: Despite a competitive and ever-evolving market, Roku has shown remarkable adaptability. Its expansion into original content and international markets indicates a clear vision for growth.
These three qualities explain why Roku dominates the connected TV market with an unbeatable 51% market share on the third quarter of 2023, according to privacy analytics firm Pixalate. Unlike Universal Display, which operates behind the scenes, Roku is front and center in living rooms across America.
Yet, the stock looks deeply undervalued these days. Yes, Roku's share price has more than doubled in 2023 but it started that recovery from a ridiculously low floor. Shares are changing hands at the affordable valuation of 3.8 times sales, which is a bargain for a company that doubled its sales in three years.
In essence, Roku presents a contrasting yet equally compelling investment opportunity compared to Universal Display. While one thrives on high-tech innovation and industry partnerships, the other simplifies the streaming experience, making it an indispensable part of home entertainment. Both are indispensable parts of modern life in America, with tremendous growth opportunities on a global level.
As we edge toward economic recovery, both Roku and Universal Display are poised to leverage their unique strengths in a healthier economy, making them smart choices for investors who want to make money from the tech sector's resurgence.
