Universal Display (OLED) Shares Skyrocket, What You Need To Know

What Happened:

Shares of OLED provider Universal Display (NASDAQ:OLED) jumped 9.5% in the morning session after the company reported first-quarter results with strong operating margin improvement. Its revenue and EPS also outperformed Wall Street's estimates. The top line was driven by a strong demand for emitter materials. Moving on, the company raised the lower end of its full-year sales guidance, with revenue expected to be in the range of $635 - $675 million. On the other hand, its inventory levels increased. Overall, we think this was still a really good quarter that should please shareholders.

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What is the market telling us:

Universal Display's shares are somewhat volatile and over the last year have had 5 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 2 months ago, when the stock dropped 8.6% on the news that the company reported fourth-quarter results with revenue missing expectations, although operating income beat slightly. The underwhelming topline performance was driven by weakness in the material sales revenue, which came in below expectations. 

On the other hand, royalty and license revenue came in ahead. However, growth in both segments continued to decline in absolute terms. Free cash flow also missed during the quarter. Management called out weak consumer spending in the smartphone and premium TV markets as a headwind to its performance during the year. 

Moving on, full-year revenue guidance fell below analysts' expectations, which is a major driver of why the stock is down. However, the company pointed to multiple growth drivers in the longer term, stating, "Looking to 2024 and beyond, we see multiple paths for growth in the coming years. The commencement of an OLED IT adoption cycle, the resumption of OLED TV growth, the rise of automotive OLED displays, and the popularity of foldable OLED mobile applications all create promising opportunities for substantial growth. In addition to the growing OLED market, we are advancing and broadening our R&D roadmap, which includes novel phosphorescent materials and architectures, as well as our OVJP manufacturing platform." Overall, this was a mediocre quarter for Universal Display.

Universal Display is down 9% since the beginning of the year, and at $169.69 per share it is trading 12.2% below its 52-week high of $193.28 from December 2023. Investors who bought $1,000 worth of Universal Display's shares 5 years ago would now be looking at an investment worth $996.88.

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