Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Universal Display (OLED -3.49%), a developer of organic light-emitting diode technologies for use in flat-panel displays, dipped as much as 10% after being downgraded to sell from hold at Canaccord Genuity.
So what: The impetus for the downgrade comes from the expectation of increased competition from Samsung and LG, which Canaccord expects to enter the phosphorescent materials market when Universal Display's patents begin to expire in 2017. With that longer-term view in mind, Canaccord drastically reduced its price target to only $19 from its previous target of $30 and slapped a sell rating on Universal Display.
Now what: I've said it 100 times and I'll probably say it at least 100 more: There's not really any need to pay attention to the short-term gyrations in share price caused by analyst actions because they rarely change an investing thesis. Canaccord does present some interesting points of contention which are worth taking note of here. However, Universal Display does have three-plus years to figure out how to potentially diversify its product line. In addition, the company is growing like wildfire at present (44% estimated revenue growth in 2014), so I have to question that Canaccord may be looking too far down the road given the significant number of variables that could alter its prognostications. In other words, don't let Canaccord's move today alter your investment thesis on Universal Display, whether as a buyer or short-seller of the stock.
