Will Universal Display Fall On Poor Consumer Adoption?

Universal Display Corp, a developer of OLED technology  for the use in flat panel displays, lighting and organic electronics, could have trouble keeping its high share price sustainable. OLED technology is thinner, more efficient, and has overall greater performance than its plasma, LCD, and LED counterparts. The price for OLED technology is fairly steep, but will likely come down, as the technology advances.

Universal Display’s recent run-up is likely attributed to Samsung, Sony, and LG adopting this OLED technology in their new, 3D-capable televisions. However, with Samsung reporting a 34% drop in first quarter profit compared to last year, shares of PANL could be under pressure. According to a Bloomberg article, consumer adoption of this newer 3D-capable technology is poor, as electronic makers Samsung, Sony, and LG struggle to persuade consumers to replace consumer’s older flat-panel displays. This poor adoption could be attributed to consumers’ anxiety to spend because of economic uncertainty.

Despite this bearish perspective on the television market, there are also bullish forecasts of increased consumer spending on non-essentials, such as upgraded television sets. Support for this perspective includes evidence such as today’s surprisingly strong retail sales numbers.

Poor consumer adoption could lead to poor sales, which is a problem for Universal Display. Poor sales could lead these electronic makers to cut orders from Universal Display. If consumers do not speed up purchases on the newer OLED TVs, the share price of Universal Display could come tumbling down. Benzinga has tried to contact Universal Display, Samsung, Sony, LG, and Best Buy, but could not find a spokesperson for an immediate comment. PANL’s price-to-sales ratio [TTM] is over 70, which is fairly high, even for a growth company.

Ultimately, the outlook for Universal Display depends on the consumer. There can be little doubt that the average consumer is wary of current economic conditions and high unemployment. If economic uncertainty continues, consumers will likely save their income, rather than spend it on newer technologies.

This article may include mentions of rumours, chatter, or unconfirmed information. Readers should beware that while unconfirmed information may be correlated with increased volatility in securities, price movements based on unofficial information may change quickly based on increased speculation, clarification, or release of official news.

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— Gary Cassady