Why Universal Display Stock Jumped 13.7% Friday Morning
Key Points
Universal Display missed Q1 earnings estimates by 41% and revenue targets by 16%, yet the stock jumped nearly 14% in the morning session.
The company announced a $400 million share buyback program, representing about 9% of its market cap.
Sometimes a "less bad than feared" quarter is all an oversold stock needs to rally.
- 10 stocks we like better than Universal Display ›
Shares of Universal Display (NASDAQ: OLED) rose as much as 13.7% on Friday morning, reaching that peak at 9:40 a.m. ET. The technology researcher and critical materials distributor behind organic light-emitting diode (OLED) screens released first-quarter results last night, falling short of Wall Street's revenue and earnings targets. Management also set full-year sales guidance below the current Street view.
That combo is usually a recipe for plunging stock prices, not a double-digit spike. What's going on here?
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Image source: Getty Images.
Yes, the results were ugly
Let's start with the raw numbers.
- Q1 revenues fell 14% year over year to $142.2 million. The analyst consensus had called for $168.4 million.
- Earnings plunged 44% to $0.76 per diluted share. Here, Wall Street expected $1.28 per share.
- Management also lowered full-year sales guidance ranges from roughly $675 million to $650 million. Analyst views were in line with the older guidance range.
Smartphone sales are slowing amid skyrocketing memory chip prices, undermining Universal Display's largest target market. Durable blue OLED elements are still an upcoming growth driver, not a revenue-generating product. Consumers aren't buying a ton of high-end TV sets in this economy.
But none of these drawbacks are big surprises. The bad news was already priced in, and then some. Even after Friday's sharp price jump, Universal Display's shares are down 37% over the past six months. Trading at 18.5 times trailing earnings with a 2.2% dividend yield, Universal Display looks more like a classic value investment than a promising growth stock.
When a stock is beaten down that severely, expectations get reset. Investors aren't comparing results to analyst estimates anymore; they're comparing them to worst-case fears.
So why are investors celebrating?
On that note, Universal Display gave investors several reasons to cheer.
- That elusive phosphorescent blue OLED element is getting closer to large-scale production, assisted by AI-powered materials research. Universal Display will provide more details in a rare conference presentation next week.
- Panel manufacturing partners such as Samsung Display (OTC: SSNLF) and BOE are ramping up next-generation OLED facilities in 2026.
- Universal Display is taking action on the falling stock chart, announcing a $400 million buyback program alongside this earnings report. That's a strong vote of confidence in a stock currently worth $4.4 billion.
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Anders Bylund has positions in Universal Display. The Motley Fool recommends Universal Display. The Motley Fool has a disclosure policy.
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