Universal Display: Needham Cuts Estimates; Industry Ramp Pushed to 2018-2019
Shares of light-emitting diode technology maker Universal Display ( OLED) are down 87 cents, or 1.4%, at $60.05, after Needham & Co.’s James Ricchiuti this morning warned that the company’s revenue will be lower than expected in 2017 as its “materials” business experiences the delayed ramp of production by customers next year.
Ricchiuti, who has a Hold rating on OLED shares, cuts his 2017 estimates to $249.7 million in revenue and $1.24 per share in net profit, down from his prior $263.7 million and $1.34.
The materials business is the majority of the company’s revenue, projected at $129 million in 2017.
“Our expectations of the scale-up of new OLED capacity assume the bulk of the ramp-up in 2018 and 2019,” writes Ricchiuti.
Ricchiuti notes that even with the cut, total company revenue is expected to rise 28.5% next year, a big rebound from growth of just 1.7% for this year.
“We still expect a strong rebound in y/y growth on the order of 28% versus our prior 36% growth estimate, which assumes materials revenue growth of over 30% and is more consistent with market growth expectations.”
He expects a conservative outlook from the company:
We believe mgmt will offer conservative 2017 guidance when UDC reports Q4 results in late Feb., particularly after having reduced 2016 guidance twice. Given the variability of UDC’s materials business, we can’t rule out further reductions to our 2017 estimates, although we believe investors are focused on what is expected to be rising OLED penetration rates in the smart-phone market in 2018 and beyond. Maintain Hold. Unchanged Reducing materials revenue expectations for 2017.
OLED is one of our 2016 UVM Picks
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