Outlook Remains Bright for This Technology Holding
A 'beat and lift' quarter, plus supporting data points from key customers, keep us bullish.
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Our shares of One-rated Universal Display OLED are moving higher following the company’s better-than-expected June-quarter results and guidance that supports the continued ramp of organic light-emitting diodes. Supporting that outlook are prospects for improving smartphone volumes per comments from Samsung SSNLF, Qualcomm QCOM and others, but also rising adoption in other end markets that should drive demand for Universal’s materials business and its higher-margin Licensing and Royalty segment.
We’ve been patient with OLED shares through the first half of 2025, and the data points we’ve listened to are coming together very nicely. We will continue to play the long game with this position as organic light-emitting diode adoption continues to rise across a wider array of end markets. To be clear, we are talking quarters, not months, for this to play out. For now, we’ll keep our OLED price target at $200, but as we get more confirming data points for that display technology adoption, we intend to revisit it.
Given today’s trading action, even though we have a One rating on OLED, we would let the latest tariff developments play out in the market in the very near term and revisit things as the market finds its footing.
Now for the Details…
Universal reported June-quarter EPS of $1.41, easily clearing the $1.16 market consensus. The beat was delivered in part by better-than-expected revenue, $171.5 million vs. the $160.8 market consensus, but more so from year-over-year improvement in margins. That improvement reflects a more favorable mix of higher-margin royalty and license fee revenue in the quarter than material sales compared to the year-ago quarter. We discussed the power of royalty and licensing business models recently as part of our "asset-lite" investment strategy, and we continue to like that high-margin business at Universal Display and Qualcomm.
Universal lifted its 2025 revenue forecast to $650 million-$700 million, up from $640 million-$700 million, and now sees its operating expenses decreasing year over year by a low single-digit percentage compared to its prior guidance of flat. That implies better margins in H2 2025, and the expectation for larger royalty and license fee revenue in H2 2025 also supports that outlook.
That supports our bullish outlook, but comments collected from key customers, LG Display LPL, and Samsung bring even more support. During its earnings call, LG Display revealed that organic light-emitting diodes displays continued to become a larger part of its overall display business. The company also reiterated its strategic focus to shift to organic light-emitting diodes from liquid crystal displays (LCDs) for smartphone, automotive, and display markets.
Samsung’s Display business commented that organic light-emitting diode adoption rates continue to rise in the TV market, and it is seeing strong demand for organic light-emitting diode monitors. Samsung also sees better volumes ahead for its smartphone business largely due to its premium segment, which has larger display sizes and utilize organic light-emitting diode displays.
Longer-term, research firm Omdia continues to see higher organic light-emitting diode adoption ahead in smartphones, TV, and the automotive sector. That includes a wider array of foldable products, including Apple’s AAPL expected foldable iPhone next year. That backs many of the signals we’ve discussed with you in the first half of 2025 regarding design wins and other product announcements utilizing organic light-emitting diode displays.
Sticking with the long-term, we’ve discussed the general illumination or white light market opportunity, and that means keeping tabs on Universal’s blue organic light-emitting diode business. The company booked a very modest amount of revenue in the June quarter, but the tipping point for that offering will hinge on Universal’s customers. For us, that means continuing to follow developments on that front from LG Display, which announced its first commercial offering in May. So far, we’ve seen the evolution and adoption following the path laid out by the light-emitting diode market, and we see no reason why that wouldn’t continue.
At the time of publication, TheStreet Pro Portfolio was long OLED and AAPL.
