For 2013, Tesla is forecasting the production of 21,000 Model S electric sedans. This is a huge increase over last year and it beat analyst expectations contributing to the sharp rise in Tesla’s share price in the past month. But the big money for Tesla lies in the mass production of its Gen III sedan, a car to be produced in the hundreds of thousands of units. With the Model S, Tesla is treading water financially but building a brand name and ramping up production capabilities. Efficient production of the Gen III sedan is what should boost Tesla’s earnings to the point to justify a share price based on fundamentals and not future expectations. When the Gen III Tesla begins rolling off the production line is when Tesla should be able to begin recognizing the true potential of its technology.
At Universal Display Corporation (NASDAQ:PANL), the shipment of tens of millions of smartphones helps to increase earnings for the OLED supplier, but the largest profits lie in the television industry. TVs require a far greater amount of Universal Display’s components and thus will generate a far larger volume of sales for the company. LG is already selling a 55” OLED TV but with a price above $10,000, it is still a ways away from mass adoption. However, smartphone sales should allow Universal Display to grow its technology, increase earnings, and bide its time until the company’s potential in the TV industry can be realized. Until then, Samsung is expected to continue using components from Universal Display in its smartphones, including Samsung’s phablets which, having larger screens, will use more OLED components than comparable smartphones.
Funding future technology
Tesla and Universal Display both have the benefits of a potentially revolutionary technology and demand for the early iterations of the technology to drive growth and give the company’s time. Over the next few years, we will see how the futures of these companies and their technologies play out and we will be able to judge whether production has been successfully scaled. I personally hold shares of Tesla and Universal Display in my portfolio as a play on the mass adoption of technology that is already generating rave reviews among those who have put up the money to experience it.
The article The Two Growing Tech Companies Have More in Common Than You Think originally appeared on Fool.com.
Alexander MacLennan owns shares of Universal Display and Tesla Motors . The Motley Fool recommends Tesla Motors and Universal Display . The Motley Fool owns shares of Tesla Motors and Universal Display. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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