Even as the wider market pulled back, shares of OLED specialist Universal Display (OLED 1.20%) rose more than 7% during Friday's trading, though they gave up some of those gains as the day went on.
So why the optimism?
As fellow Fool Eric Bleeker noted on Wednesday, Samsung was all set to release its latest flagship smartphone, the Galaxy S4, yesterday evening. Given Samsung's incorporation of OLED tech in its past Galaxy phones -- and considering the fact the Korean conglomerate is currently responsible for the vast majority of Universal Display's total sales -- anxious investors have remained on the edges of their seats to confirm to what extent (if at all) the Galaxy S4 would utilize Universal's OLED materials in its screens.
The Galaxy S4 will go on sale next month and boasts a massive 5-inch AMOLED screen -- up from 4.8 inches in the Galaxy S III -- with an impressive pixel density at 441 pixels per inch. As a basis for comparison, note Apple's (AAPL -0.06%) iPhone 5 has a pixel density of just 326 pixels per inch.
Of course, that doesn't necessarily mean Apple fans will be swayed, especially when we remember CEO Tim Cook's recent assertion that OLED screens' color saturation is "awful," while at the same time noting Apple's own retina displays are nearly twice as bright. Even so, those comments seemed especially interesting after I noticed that, just a few days earlier, Apple may have quietly hired an OLED expert away from Korean electronics giant LG Display (LPL -0.38%), fueling further speculation of Cupertino's interest in the versatile technology.
In addition, just this morning analyst Brian Lee of Goldman Sachs added fuel to the fire by suggesting that, based on his channel checks, Universal Display remains "well positioned to benefit from [Samsung's] upcoming Galaxy S4 ramp given its leverage to both red and green phosphorescent (e.g. emitter and host) materials" in the design of its display.
What's more, Lee estimated Universal Display could end up collecting between three and four times as much revenue from each Galaxy S4 device as it did from every S III smartphone, "given its expansion in materials supplied from one to three types."
Of course, Lee's perspective should come as little surprise considering the fact he has long remained a proponent for Universal Display's business and currently holds a $41 price target for its shares.
The bear case
On the other end of the analyst spectrum, let's not forget Piper Jaffray analyst Jagadish Iyer who, just a few weeks ago, lowered his firm's price target for shares of Universal Display from $18 to $16 after voicing concern that Samsung may also be using green host materials from Japanese OLED supplier Nippon Steel.
While Iyer's comments helped shares of Universal Display fall by as much as 13% that day, his concerns appeared to be considerably overblown after the company skyrocketed 16% just a few days later following its solid fourth-quarter earnings results.
Now tell me how you really feel
While Samsung currently remains Universal Display's largest source of revenue, it's easy to forget things are about to get much more interesting in the OLED space as other companies finally begin to embrace the advantages of using its tech.
For instance, as I wrote a few weeks ago, both Samsung and LG are all set to begin mass production of their cutting-edge 55-inch OLED televisions, and Japanese competitors Sony and Panasonic teamed up last year to create their own 56-inch models, which were unveiled at this year's Consumer Electronics Show in Vegas.
Over the longer term, companies including LG and Philips have also made huge investments to further develop their own high-efficiency OLED lighting solutions -- the market for which, by some accounts, could grow from just a few million dollars today to over $2 billion by 2020.
Foolish final thoughts
With this in mind, I've long maintained my bullish position on shares of Universal Display and have no intention of closing my outperform CAPScall on the company anytime soon.
In the end, when (not if) the aforementioned catalysts materialize, I'm convinced that, while today's pop feels great now, it will barely register as a blip in the radar down the road when compared to the mind-boggling gains Universal Display can afford patient investors with a longer-term mind-set.
