Goldman Sachs’s Brian Lee today reiterates a Buy rating on shares of organic light-emitting diode technology maker Universal Display (OLED), and raises his price target to $161 from $150, writing that the company’s ability to make available “blue” materials for OLED screens on phones can be a “game changer” for the company and double its revenue per phone.
Universal already sells so-called emitters for the red and green color components in an OLED display, and “host” materials for green, notes Lee. Each new material boosts OLED’s revenue and its revenue per phone, he notes.
For example, with the introduction of the green materials in the Samsung Electronics “Galaxy S4” phone in 2013, the company’s revenue per phone rose to almost 50 cents per unit from 30 cents the year before.
He thinks in future, being able to sell both host and emitter for phosphorescent blue could boost revenue per phone to over 60 cents. That would include not just units of Samsung devices, but also the Apple (AAPL) iPhone. Apple’s forthcoming iPhone X is the first iPhone to have an OLED display, and the screens are being made by Samsung, Universal’s biggest customer.
Lee goes through a review of comments by Universal’s chief executive, Steve Abramson, and concludes that “the company has more recently stepped up its efforts and rhetoric around the potential commercialization of blue over the past 1-2 years,” after years spent on developing the technology.
Lee cites remarks such as the one Abramson make on August 3rd, at the time of the company’s quarterly earnings report, in which Abramson stated, “We believe that we are getting closer to being able to deliver an all-phosphorescent emissive stack with the color, lifetime and efficiencies that our customers need and want.”
Adds Lee, “additionally, we think it is noteworthy that OLED has now owned the BASF IP assets for over a year now and recently suggested samples of blue host materials have been sold (all quotes are from Steve Abramson, CEO of OLED and sourced from Thomson Reuters).
Depending on how much of the handset market Universal is able to win, it could see its 2019 revenue rate be higher than the $546 million Lee now estimates, he writes. For example, with 50% of the market, Universal’s revenue could be $693 million, while its profit could be higher than his $4.81 per share estimate, at more like $6.39.
Universal shares today closed up $4.65, or 3.5%, at $136.70.