Yet again, boosting our price target on Universal Display

• 19 September 2017
• by: Chris Versace, Chief Investment Officer
• in: Disruptive Innovators,Tematica Investing
• Tags: Apple, Applied Materials, iPhone X, OLED display, OLEDs, Universal Display
• note: no comments

KEY POINTS FROM THIS POST:

• We are boosting our price target on Universal Display (OLED) shares to $175 from $135 given the increasingly apparent shortage in organic light emitting diode displays.

• Maintaining our price target of $55 on Applied Materials (AMAT).

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Over the last week following the introduction of the organic light emitting diode display (OLEDs) contained in Apple’s (AAPL) new iPhone X, Universal Display (OLED) shares on the Tematica Investing Select List have come into focus.

How into focus?

Even USA Today ran an article on the iPhone X that cited the current OLEDs shortage as the reason behind the later than expected shipping date for that new flagship Apple (AAPL) smartphone:

“OLED manufacturers can’t build the screens fast enough as they increasingly pop up on smartphones, high-definition TVs, watches, virtual reality headsets and other gizmos. It’s an issue that not only is dogging Apple, costing it billions of dollars in short-term sales, but has tripped up Samsung, HTC and Google, too.”

The article goes on to discuss OLED display dynamics, as well as the demand for the technology from larger format TVs and prospects for other applications. On the heels of that article, we are hearing chatter among traders that Wall Street firms are turning increasingly bullish on Universal Display shares, hence the “pop” in the share price over the last few days — opening above $140 at the bell this morning.

From our perspective, this is not necessarily new information and we’ve suspected that as the Apple event came and went, the herd would recognize Universal Display’s position in the OLED display industry. As the herd once again catches up to us, we’re going to leap ahead of them yet again by boosting our price target on Universal Display shares to $175 from $135. This new price target, which equates to 1.0x on a price to earnings growth basis when applied to consensus 2018 EPS expectations of $2.85 up from $1.10 in 2016, offers just over 20% upside from current levels.

• We are boosting our price target on Universal Display (OLED) shares to $175 from $135.

 

As we boost this price target, we should also keep in mind the current organic light emitting diode capacity crunch bodes well for display equipment demand at Applied Materials (AMAT). As a reminder, Applied Materials is holding its 2017 Analyst Day on September 27^th, and we expect a bullish update on both its display business as well as its semiconductor capital equipment one.

• Our price target on Applied Materials (AMAT) shares remains $55