Capitalizing on the Boom in Smartphones and Tablets
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Universal Display (NASDAQ: PANL) had its share price soar recently after missing analyst estimates for several key areas in its quarterly earnings report. I have been following the company for some time now and have seen its bumpy ride. When the price was just below $60 in September of last year, I thought that this company might be overvalued. The company causes excitement in the investment community because its business model is capitalizing on the biggest trend in not only the mobile handset arena but the tablet market as well. I think the market saw the potential of its business but as it is often fond of doing got ahead of itself before the business-end of the idea caught up. A disappointing quarter caused the share price to tumble. Though some of the results missed estimates it was probably the most successful quarter in company history, which was echoed by company CFO Sidney Rosenblat. It showed that Universal Display is going in the right direction and is beginning to capitalize on its patents and market potential.
The company reminds me of two other stocks in the fool universe one that is sadly no longer with use so to speak. Marvel was a Motley Fool recommendation all the way back in the day when the first set of Spiderman movies were in the works and the idea of monetizing their vast universe seemed like a gold mine. The fools who listened, the market and other companies saw first hand how successful that potential became. They took control of their movie rights and began a string of hit movies and franchises that are still being rolled out today. In 2009 Disney (NYSE: DIS) purchased Marvel Enterprises and has continued monetizing their universe of characters that saw in the last two years hit movies Iron Man 2, The Avengers, Captain America and Thor. I draw this comparison because when the Fool had recommended this stock, the reality of successfully monetizing these characters had just begun. It was far from reality and needed some successful execution to bring to reality. Universal Display is in a similar situation with their OLED technology. It seems that there is a vast number of uses for their tech from handsets to televisions but whether they can bridge the gap from patents to revenue streams has been the question. Though they missed the analyst estimates on earnings per share the report seemed to demonstrate to investors that they are on the right path and will soon be hitting full stride.
The second company that Universal Display reminded me of was Imax (NYSE: IMAX) in the potentially bumpy ride it will have to success. I rode the Imax train from $15 all the way up to $35 and back down to sub $15. Now at just over $20 the business is still growing and expanding worldwide. The experience you get watching a big budget Hollywood movie in an Imax theater is like none other, ask anyone who saw The Dark Night movie in an Imax theater. The business was saddled with debt and there are constantly evolving competitive forces, but what affects Imax most is the type of movies being released. As of now Imax has no control over when a movie perfectly suited for the Imax screen like a Batman will be released. Their theaters charge a premium most consumers will only pay when they feel there will be some definitive visual benefit. Similarly Universal Display only produces the screens for the technology to utilize. Therefore if manufacturers are slow to adopt or release products with their OLED technology, they fall victim to declining profits and market displeasure. As we have seen with Imax a long term strategy will be very effective whereby you sell parts of your holding if you feel the market rushes ahead of itself, and buy more when the market punishes the company for perceived faults.
Over the long term barring a revolutionary technology being invented, which at the pace of tech advancement these days is a very real threat, Universal Display is poised to keep moving upwards and onwards. They are one big deal announcement away from seeing another bounce in their price and as their present customers release more products with their technology we will see a higher adoption rate of OLED throughout the market, which will benefit the bottom line of Universal Display substantially.
mooseelz owns shares of Universal Display and Imax. The Motley Fool owns shares of Walt Disney, Imax, and Universal Display. Motley Fool newsletter services recommend Imax, Universal Display , and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.