|Goldman Reiterates Buy 6-24-21|
Universal Display Corp. (OLED): Takeaways from management meetings; Buy
We hosted investor meetings with OLED management this week in the (virtual) European region, where investor discussions centered on trends impacting the 2021 outlook, supply chain dynamics, and blue emitters, among other topics. We remain Buy rated with our key takeaways from the roadshow summarized in more detail within.
n Outlook for 2021 remains intact... While OLED acknowledges that 1Q21 results came in better than internal expectations, the company is comfortable in maintaining its 2021 outlook for now. Specifically, the company is seeing nothing materially different vs. 1-2 months ago in terms of what the rest of the year is shaping up to look like and sees $530-$560mn of revenue for this year as the appropriate range, with potential updates to be provided to the outlook as visibility on certain factors (see below) improves through the course of the year.
n ...but likely embeds some conservatism owing to a few factors. In our view, the company is remaining prudently conservative owing to factors such as (i) shortages across the semiconductor supply chain and (ii) ongoing uncertainties related to COVID.
n Supply chain issues are indirect and having limited impact for now. OLED does not appear to be seeing any impact on its business and no real direct impact in terms of constraints, and the company does not believe that customers are buying safety stock or building inventory. In terms of its own supply chain, the company did note that it is still watching the pricing trends for one of its raw materials - iridium - which OLED noted has seen a meaningful price increase over the past few years (e.g. $400 per troy ounce to over $6,000 at peak, though down since then). That said, the company has been building inventory steadily on iridium and said that it has enough stock for several years worth of needed supply, and thus does not see any constraints in the near-to-medium term.
n OVJP continues to progress. OLED noted that it now has 25 people working on the West Coast on an OVJP alpha tool. This tool remains on target for launch at the end of 2022 and will be an 8.5G equivalent scale. While timing of the full commercialization remains uncertain, OLED is actively looking at partners,
n Blue status is unchanged - excellent progress. OLED provided no real updates on blue. The company did cite that the recent Samsung Display research presented at the SID 2021 conference noted significant improvements and acknowledgment of working with OLED’s blue phosphorescent emitter. At the same time, OLED confirmed that it has development blue materials shipping to multiple customers and said that it is continuing to make excellent progress on its path toward reaching commercial specs. In terms of any potential timeline, OLED reiterated that following commercialization, it would likely be 9-12 months before its blue materials find their way into a commercial product, meaning a 2022 device is likely the earliest timeline, in our view.
Our 12-month price target of $275.