Better Buy: Universal Display vs. LG Display
Universal Display (NASDAQ: OLED) and LG Display (NYSE: LPL) are both in the Organic LED (OLED) business, which is rapidly gaining share in smartphones, TVs, tablets, and monitors. OLED technology provides a better picture and is more energy-efficient -- it is a better mousetrap. As an investor, which stock would be the better bet on OLED technology?
The OLED market is hot right now; however, the business models of the two companies are vastly different. LG Display is a manufacturer of OLED screens, while Universal Display is an intellectual property company that earns royalties and supplies proprietary chemicals to manufacturers. As the popularity of OLED technology grows, more manufacturers enter the business, which is great news for one and not the other. Additional competitors mean falling prices and more unit volume, and cheaper products attract consumers. For a manufacturer like LG Display, that means falling margins. For an intellectual property company like Universal, it means more revenue. In essence LG Display is a maker, while Universal is a toll-taker.
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