Following tariff-related setbacks earlier this year, Universal Display stock dropped 27% in a month. The stock did briefly rebound by 17% after President Trump announced a 90-day tariff pause for countries not engaging in retaliation, though this recovery didn’t last. Despite ongoing trade tensions with China—which contributes around 35% of OLED’s revenues—several signs suggest the stock’s future could be more promising than currently perceived, offering a potential buying opportunity. For investors seeking gains with less individual stock risk, the High-Quality portfolio has consistently outperformed the S&P 500, returning over 91% since inception.
Price Action Signals Attractive Entry
- OLED’s current price aligns with a historical support range that drew strong buying in 2018, 2020, and 2022.
- The stock has consistently moved within a broad range for nearly 10 years and now sits close to the lower end of this pattern.
- These technical indicators point to a potentially favorable time to enter a position.
China Standoff’s Real Impact May Be Limited
- Although 35% of OLED’s revenue is tied to China, understanding how this revenue is generated is key.
- Universal Display licenses its technology, with Chinese manufacturers producing panels used in products exported globally—not just to the U.S.
- Considering the U.S. remains a crucial market for finished goods, China may be incentivized to reach a resolution, easing long-term trade tension effects.
Solid Financials And Optimistic Analyst Targets
- Universal Display remains financially strong, growing over 12% in the past year with solid margins—a 3-year average cash flow margin near 30%, and a trailing 12-month net margin around 35%.
- The company’s P/E ratio is below 30, and it carries zero debt.
- Analyst price targets reflect optimism, with the average estimate about 70% higher than the current $110 share price.
Risks Remain—But So Does Opportunity
- Despite these positives, any individual stock comes with risks.
- OLED has experienced major drawdowns exceeding 50% during broader market declines in 2018, 2020, and 2022.
- This volatility reflects its exposure to consumer discretionary demand, which typically softens during economic slowdowns.
- That said, the stock has shown resilience with strong rebounds post-decline, potentially offering upside as the cycle turns.
Taking into account the current price setup, the globally diversified revenue base, solid financial health, and bullish analyst expectations, OLED stock could offer a compelling buying opportunity. That said, investors should weigh the historical volatility. Concerned about OLED’s price swings? The Trefis High Quality Portfolio, featuring 30 stocks, has consistently outperformed the S&P 500 over the past four years. Why? HQ Portfolio stocks tend to deliver superior returns with lower volatility—offering a smoother investment experience, as shown in HQ Portfolio performance metrics.
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