PANL's business model of licensing technology and sole source of phosphorescent emitters (red, green) provides a unique competitive advantage. Moreover, we believe the shares are undervalued and see good price catalysts, including signing up more customers for long-term agreements (namely LG), continued penetration of OLED displays into devices (handsets, tablets, TVs), the discovery/commercial production of blue phosphorescent emitters and long-term penetration in the OLED lighting industry. While competing technology exists, we believe that PANL's products deliver better performance and should continue to lead in the emitters space.
- Vishal Shah, Deutsche Bank Analyst
Deutsche has put a $45 price target on the stock. However, I believe they may be wrong in their analysis of Universal Display.
One of the reasons, Deutsche put a buy on Universal Display is because they believe that the shares are undervalued. I disagree with this and actually believe the stock may be fairly valued.
Universal Display is expecting to earn .70 cents this. Based on the current market price, that puts the P/E around 47 for this year. If Universal Display hits analyst estimates for 2013, then the P/E will be 18.
Now many of you may be thinking that Universal Display is still in a growth phase, therefore it can afford such a high multiple. However, its important to note that the company hasn't been close to analyst estimates.
While the company reported a narrower loss for Q1, it was a sign that the company was turning around. Management was happy as they state that demand would continue to increase. Even though it seemed the company was on the right track, the stock still fell more than 10% after announcing earnings. This is simply because analysts got ahead of themselves. Analysts were expecting a profit of 4 cents per share compared to the actual 3 cent loss the company reported.
Although, I expect PANL to continue to see strong growth in sales, it won't be enough to please analysts. The $45 price target that Deutsche set shows that they have gotten ahead of themselves.