Universal Displays: Idea of the Month
OLED stock offers a 30% upside from current levels with most of the risk already priced in.
OLED stock price as of Publication: $102/share.
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Business Overview: Universal Displays is the largest holder of OLED related patents. The company also manufacture sensitive materials related to OLED displays.
Our Outlook: Our base case Price Target, which we consider conservative, of $130 per share (30% upside) is based on a 30 PE multiple applied on our 2020 expected earnings per share and discounted at 8%.
Samsung-OLED’s win-win relation: OLED is the sole supplier of OLED display materials and designs to Samsung Displays which accounts for 63% of OLED’s revenues.
Our Assumptions: 100% penetration of OLED in High-end smartphone market. The High-end smartphone market to increase from last years’ level of 50% of the global smartphone market to 58% by 2020.
Universal Displays “royalty segment” assumptions: 0.5% royalty per ASP (low-end of historical rate) of a display.
Universal Displays “materials segment” assumptions: 20 cents Universal Display content per OLED phone screen and $40 content per OLED TV.
