Why Are Universal Display (OLED) Shares Soaring Today

Radek Strnad /
2023/08/04 10:32 am EDT

What Happened:

Shares of OLED provider Universal Display (NASDAQ:OLED) jumped 5.76% in the morning session after the company reported second quarter results that blew past analysts' revenue and earnings per share estimates, with both metrics beating by double digits. It was also good to see operating margin improve. On the other hand, its inventory levels materially increased. Moving ahead, revenue guidance for the full year came in ahead of Consensus. Overall, the results seemed fairly positive, and shareholders should feel optimistic. 

Management sounded bullish, noting that "The OLED industry continues to lay the groundwork for promising growth in 2024 and beyond as the OLED IT adoption wave is poised to commence. As a key enabler in the ecosystem, we continue to support the market's growth by leveraging our nearly three decades of innovation and know-how, investing in new and next-generation OLED solutions, and delivering increasing value to our customers."

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What is the market telling us:

Universal Display's shares are somewhat volatile and over the last year have had 14 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 previous big move was 3 months ago, when the stock gained 5.97% on the news that the company reported first-quarter results that missed analysts' revenue expectations. However, earnings per share came in above Consensus estimates, and free cash flow was positive which is good news given the cash burn recorded in the previous quarter. In addition, inventory levels improved and the company announced acquisition of Merck KGaA, Darmstadt, Germany's phosphorescent emitter patent portfolio. 

Zooming out, OLED reaffirmed their 2023 outlook, which is comforting in light of macro uncertainty. It was a mixed but overall positive quarter for the company.

Universal Display is up 45.8% since the beginning of the year. Investors who bought $1,000 worth of Universal Display's shares 5 years ago would now be looking at an investment worth $1,510.

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