Universal Display (NASDAQ:OLED) Reports Bullish Q1

OLED provider Universal Display (NASDAQ:OLED) beat analysts' expectations in Q1 CY2024, with revenue up 26.7% year on year to $165.3 million. The company expects the full year's revenue to be around $655 million, in line with analysts' estimates. It made a GAAP profit of $1.19 per share, improving from its profit of $0.84 per share in the same quarter last year.

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Universal Display (OLED) Q1 CY2024 Highlights:

• Revenue: $165.3 million vs analyst estimates of $150.4 million (9.9% beat)
• EPS: $1.19 vs analyst estimates of $1.02 (16.7% beat)
• The company reconfirmed its revenue guidance for the full year of $655 million at the midpoint
• Gross Margin (GAAP): 77.6%, up from 72.9% in the same quarter last year
• Inventory Days Outstanding: 426, up from 415 in the previous quarter
• Free Cash Flow of $64.95 million, up 120% from the previous quarter
• Market Capitalization: $7.24 billion

“We began the year on a strong note with solid first quarter results across the board,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation.

Serving major consumer electronics manufacturers, Universal Display (NASDAQ:OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.

Analog SemiconductorsDemand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.

Sales GrowthUniversal Display's revenue growth over the last three years has been mediocre, averaging 16.4% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $130.5 million in the same quarter last year to $165.3 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Universal Display had a good quarter as its revenue grew 26.7% year on year, topping analysts' estimates by 9.9%. Universal Display's growth inflected from negative to positive this quarter, indicating that the recent cycle downturn is likely in the rearview mirror.

Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Universal Display's DIO came in at 426, which is 61 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.

Key Takeaways from Universal Display's Q1 Results We were impressed by Universal Display's strong operating margin improvement this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its inventory levels increased. Overall, we think this was still a strong quarter that should satisfy shareholders. The stock is up 4.6% after reporting and currently trades at $163.5 per share.