Universal Display: Three Points Keep Us Neutral

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Jed Dorsheimer and David Evanson

Forbes.com, Fall, 2011

Following a jump in shares last week for Universal Display Corp (PANL), Canaccord Genuity sustainability analyst Jed Dorsheimer reiterated his HOLD rating on the company, citing three key points:

• Key risks to PANL, in our opinion, remain competition from other material suppliers, contract structure post 2017, and market acceptance/execution risk of OEMs [original equipment manufacturers].

• In the near term, our view is balanced as we see positive catalysts such as signing of LG Display (LPL), AU Optronics (AUO) and others perhaps offsetting the longer-term risks.

• While handset displays are the near-term driver, the macro model is quite sensitive to tablet and TV adoption, which are typically G6 through G8 fabs. These consume an order of magnitude greater materials and are key to market size in the outer years, but carry extensive execution risk due to complexities described in our whitepaper.

Mr. Dorsheimer lowered his price target on the company to $40 from $41.

Of the OLED (organic light emitting diode) market as a whole, Mr. Dorsheimer said:

“Despite the technical limitations [in comparison to LCDs], SMD [Samsung Mobile Display] expects to spend over $10B in CAPEX [capital expenditure] between 2010 and 2013. Handset OEMs find the ability to differentiate through the display compelling, and costs are becoming more competitive. As a result, we believe OLEDs hold tremendous growth potential.”