Amidst a slowing of price inflation and unyielding consumer spending in October, the economy displays signs of recovery. Downturns are finite, and the prime time for investments lies in times of low valuations. Hence, this appears to be a favorable time to allocate your hard-earned funds into acquiring some top-notch tech stocks at discounted prices.Thank you for reading this post, don't forget to subscribe!
The proverbial bull is preparing for a fresh surge. You wouldn’t want to be left empty-handed as market sentiment abruptly turns bullish. Let me demonstrate why you should ponder acquiring some universal display (OLED 0.51%) and Roku (ROKU 3.88%) while the shares are trading favorably.
Universal Display: An innovative and sustainable beacon in high-definition
Amidst an economy encumbered by elevated interest rates, when seeking long-term investment prospects, a pristine balance sheet and positive operating cash flows are crucial. Such elevated rates cannot impede a corporation bearing no long-term debt and no apparent need for new loans or debt instruments in the near future.
From this standpoint, consider Universal Display.
The primary developer of technologies for organic light-emitting diode (OLED) panels has remained free of any long-term debt since 2005, and its operating cash flows have rebounded after a challenging few quarters. In the most recent third-quarter update, Universal Display’s free cash flow stood at $35 million, representing 25% of its total revenue.
Moreover, this revival isn’t solely centered on the smartphone and tablet screens that have historically propelled Universal Display’s business expansion.
- The company’s energy-efficient display and lighting technologies are ideally suited for electric vehicles.
- The unparalleled contrast and vivid colors in an ultrathin form factor render OLED TV sets ideal for expansive living room entertainment.
- Furthermore, OLED’s capability to generate high-quality images on flexible, transparent, and rollable screens opens up an unparalleled market segment. Wherever a design team requires a digital screen but traditional LCD technology falls short, Universal Display’s OLED solutions are primed to fill that void.
Furthermore, highly efficient production methods such as organic vapor jet printing can now manufacture OLED screens using processes commonly employed in inkjet printers. As partners in screen manufacturing integrate these groundbreaking technologies, the cost of producing OLED panels will decline. Subsequently, OLED screens and lighting panels will proliferate.
Progress toward these growth-boosting research objectives remained unabated by the COVID-19 pandemic or the inflationary crisis. Universal Display had the flexibility to expand its research and development budget even during the most challenging times, thanks to its robust balance sheet and near-ideal track record of generating positive operating cash flows:
This endeavor is expected to be fruitful as the global economy rebounds, inspiring consumers worldwide to spend on electronics featuring OLED panels. Once again, this isn’t solely a smartphone opportunity. Universal displays capitalize on the growth of electric vehicles, the transition from cinemas to well-equipped home entertainment setups for sustained entertainment, and much more.
The combination of financial robustness and innovative prowess makes Universal Display an appealing prospect in this economy. Devoid of long-term debt and with a significant focus on research and development, the company is positioned to make the most of the forthcoming economic resurgence. As it extends beyond smartphones into electric vehicles and flexible displays, its financial steadiness and innovative prowess stand to present a unique growth narrative in a recovering economy.
Roku: Effortless Streaming in a Complex Universe
Explaining Universal Display’s operations necessitates some advanced technical understanding, even though its display technology is now found in every iPhone and numerous mid-range Android phones. On the other hand, Roku is a more recognizable household name. Thus, I’ll keep this discussion succinct.
Roku has entrenched itself as a staple among media-streaming platforms, renowned for its user-friendly devices and interface. The company’s strength lies in its visibility and direct connection with consumers. Initially established as the internal hardware division of Netflix (NFLX -0.22%) when the company first explored digital streaming, Roku was at the forefront, ready to capitalize on its first-mover advantage.
Here’s why Roku stands out in the burgeoning media-streaming market:
- Widespread Adoption and User-Friendliness: Roku’s devices and platforms are acknowledged for their simplicity and accessibility, rendering digital media streaming effortless for a broad spectrum of users. Roku’s extensive experience in establishing its sector and developing a user-friendly interface is unrivaled.
- Strong Market Position: As the trend of cord-cutting gains momentum, Roku’s role as a central hub for various streaming services becomes increasingly valuable. This position is pivotal in a market where convenient access to content is paramount.
- Adaptability and Expansion: Despite a competitive and continuously evolving market, Roku has displayed remarkable adaptability. Its foray into original content and international markets indicates a clear trajectory for growth.
These three aspects elucidate why Roku dominates the connected TV market with an unrivaled 51% market share in the third quarter of 2023, as per privacy analytics firm Pixelate. Unlike Universal Display, which operates behind the scenes, Roku is front and center in American living rooms.
Furthermore, the stock presently appears undervalued. While Roku’s stock price is anticipated to more than double in 2023, it commenced its recovery from excessively low levels. The shares are trading at an attractive valuation of 3.8 times sales, representing a bargain for a company that has doubled its sales over three years.
To summarize, Roku presents a contrasting yet equally compelling investment opportunity in comparison to Universal Display. While one thrives on cutting-edge innovation and industry collaborations, the other simplifies the streaming experience, establishing itself as an essential component of home entertainment. With substantial growth prospects globally, both are indispensable elements of contemporary American life.
As we progress toward an economic recovery, both Roku and Universal Display are poised to leverage their unique strengths in a flourishing economy, offering prudent options for investors seeking to profit from the resurgent tech sector.
Suzanne Frey, a board member of The Motley Fool and an executive at Alphabet, holds positions in Alphabet, Netflix, Roku, and Universal Display. The Motley Fool has positions in and recommends Alphabet, Apple, Netflix, and Roku. The Motley Fool recommends Universal Display. The Motley Fool adheres to a disclosure policy.