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Why Universal Display Corp. Stock Has Fallen by 50.2% in the First Half of 2018

Anders Bylund, The Motley Fool

What happened

Shares of Universal Display (NASDAQ: OLED) fell 50.2% in the first half of 2018, according to data from S&P Global Market Intelligence. Most of the plunge happened in the first three months of the new year, based on a disappointing earnings report and potentially bad news out of Cupertino, Calif.

Two young bueinesspeople spread their hands in confusion over what they see on a shared computer screen.

What? Image source: Getty Images.

So what

The technology researcher that makes it possible to build modern smartphone and TV screens on organic light-emitting diodes (OLED) saw share prices tripling last year, largely due to Apple (NASDAQ: AAPL) finally including OLED screens in its popular iPhone product line. But the same investors who flocked to Universal Display based on Apple's involvement were also quick to sell out and run away when it turned out that high-end iPhone sales might stall in 2018.

On top of the Apple-centered speculation, Universal Display also fell short of Wall Street's earnings targets in February. However, that miss sprung from an $11.5 million one-time tax expense to account for last December's overhaul of corporate tax rules. Without that item, adjusted EPS of $0.93 would have crushed Wall Street's $0.85 target.

Now what

Universal Display's stock price was arguably overheated in early 2018, based on a single customer whose business certainly is welcome but by no means game-changing. The company already serves a large portion of the larger-volume Android market, plus big-screen TV sets and lots of embedded devices. And it has an eye toward OLED lighting panels as a long-term growth driver.

I would not hesitate to recommend starting a position in Universal Display at these prices, or adding to your existing holdings. The recent plunge makes even less sense than the skyrocketing Apple-focused gains of last year.

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Anders Bylund owns shares of Universal Display. The Motley Fool owns shares of and recommends Apple and Universal Display. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.