Universal Display Corporation (OLED), QUALCOMM, Inc. (QCOM): A Sharp Drop Is a Buying Opportunity for This OLED Supplier

Despite high price-to-earnings multiples, there is little bearishness for ARM Holdings plc (ADR) (NASDAQ:ARMH). The company generates healthy royalty revenues, and embedded chip demand is rising. ARM chipsets appear in a number of popular tablets and other mobile devices as well.

Investor interest in semiconductors contrasts to the negative sentiment for Universal Display. Any surprise earnings strength from Universal Display when it reports on August 8 could mean a bigger move up for its shares.

Risks

Universal Display relies heavily on Samsung for sales, though it is working to grow its customer base. LG and AUO are customers, and the company has more than 20 different customers that could become bigger buyers of OLED products.

The company also relies heavily on sales for too few emitter colors. Universal Display only added four new commercial materials (green emitter, green host, yellow emitter, and yellow host) in its first quarter, so it will take time before sales in these other segments grow. Since blue is a higher frequency and needs more energy, UDC does not have blue emitter yet.

Foolish bottom line

The launch of OLED TVs would be great news for Universal Display, but mass production is not likely until 2015 at the earliest. As investors wait, the company will continue to thrive as a supplier of OLED products for the smartphone market. Indications are high that the market for OLED suppliers is positive: the Novaled takeover rumor supports the view that consolidation in the industry is possible. If these rumors are true, then Universal Display shares will be moving up, not down.

Chris Lau has no position in any stocks mentioned. The Motley Fool recommends Universal Display . The Motley Fool owns shares of Qualcomm and Universal Display.

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