Why Universal Display Stock Dropped Today

Universal Display (NASDAQ: OLED) stock tumbled 10% through 2:50 p.m. ET Friday after missing on earnings last night.

Heading into the report, analysts forecast Universal Display would earn $1.17 per share on $165.8 million in quarterly sales. The company actually earned only $0.92 per share, and sales came in below $140 million.

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Universal Display Q3 earnings

Universal Display's sales plunged 14% year over year, a fact management blamed on "customer pull-ins earlier in the year and a one-time out-of-period adjustment," and that seems to have been affected by lower revenue from royalty and license fees.

Gross margin on the sales Universal Display did make, furthermore, shrank by three percentage points to 75%, and operating margins also contracted. Ultimately, this resulted in a 34% year over year decline in earnings.

Is Universal Display stock a buy?

CEO Brian Millard insists Universal Display can still "capture growth across this expanding market" -- but perhaps not right away. In light of third-quarter results, Universal Display management reduced its guidance through the end of this year. The company now anticipates full-year sales toward the low end of its previous guidance range of $650 million to $700 million.

Relative to last year's sales of $647.7 million, this implies that sales might not grow much at all in 2025.

And profits? So far, earnings of $4.64 for the last 12 months keep Universal Display roughly on track for break-even earnings against 2024. Hopes that Universal Display can achieve analyst targets for $4.95 per share this year appear to be dimming.

At a current valuation of nearly 27 times earnings, with essentially no growth and the potential for earnings to fall, it's hard to call Universal Display stock any kind of a "buy" right now.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Universal Display. The Motley Fool has a disclosure policy.