Shares of Universal Display Corp. (NASDAQ: OLED) gained 12.4% in May, according to data from S&P Global Market Intelligence. The month was keynoted by a strong earnings report, followed by a tempting Apple (NASDAQ: AAPL) rumor at the end.
Universal Display reported respectable first-quarter results on May 3, and the stock jumped 13% the next day. The reported results were a mixed bag when compared to the year-ago quarter and analyst expectations.
But the company also started following an updated set of revenue accounting rules that put a damper on both sales and earnings. Without that change, Universal Display would have crushed Wall Street’s published estimates. That’s why the stock’s surge made sense, even if it looks like Universal Display fell short of Wall Street’s targets.
Near the end of May, Universal Display shares jumped again on rumors that Apple had decided to use OLED screens in all three of this year’s new iPhone models. A 17% intraday jump mellowed down to a 4% gain at market close, since investors had trouble finding second sources to confirm this radical idea. But a small gain still remained on the books.
None of these moves were terribly surprising in the light of the news nuggets that sparked them. But it should be noted that smartphone screens are becoming less and less essential to Universal Display’s overall success. Large OLED TV screens are the rising stars at the moment, to be supplemented or even supplanted by lighting panels a few years down the road. In a business model where the surface area of OLED-covered screens and panels ultimately decides Universal Display’s royalties and material sales, bigger is better for both the company and its investors.
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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.