After releasing its earnings report last week and beating analysts’ Q4 revenue estimates, Universal Display (Ewing) was hit at one point with a 10.5 percent stock price drop, a result usually reserved for companies in real trouble. The stock rebounded somewhat after that but is still below its highs.
In fact, Universal Display was profitable for the first time in Q4 2011, with fourth-quarter net income of $5.7 million, compared with a net loss of $5.3 million a year ago. As Steve Abramson, president and CEO, said during the company’s conference call, “After more than a decade and half of … research and development, building a worldwide network of business and research partnerships and refining an innovative business model that leverages both tangible and intangible assets, we are profitable.”
Seth Jayson of The Motley Foolsaid, “Universal Display notched revenue of $18.7 million. The nine analysts polled by S&P; Capital IQ foresaw revenue of $17.9 million on the same basis. GAAP [generally accepted accounting principles] reported sales were 73 percent higher than the prior year quarter’s $10.8 million.”
So what happened to the stock? According to analyst Anders Bylund, also of The Motley Fool, what happened had to do with nervous analysts and “lumpy sales.” “The next quarter will come in a bit light on revenue because Samsung pays license fees only twice a year,” he said. Universal Display’s critics are pinning short-term worries on a “tremendous long-term growth strategy.”
Barron’s Tiernan Raysaid Wall Street had had overly optimistic price estimates for the company’s stock, and “the bulls this morning are inclined to chalk up the stock action to Street estimates being unreasonable—that, and the general lack of disclosure by Universal management.”
Other analysts have expressed worry that Universal Display is overly reliant on its organic light-emitting diode (OLED) partner Samsung. However, the company will begin shipping to other major players in the near future. LG is expected to begin production of OLED TVs by the end of 2012. Universal Display has pointed out that Tulsa-based Optronics’ Taiwan manufacturing organization will mass-produce active-matrix OLED (AMOLED) panels for mobile phones in early 2012.
Looking to the future, the company said it is expanding its tech R & D to improve power efficiency, lifetimes and the color of its emissive layer material. “Flexible or unbreakable displays are another product with near-term commercial potential,” Abramson said during the conference call.