Why Universal Display Corporation Stock Popped 27.1% in August

What happened

Shares of Universal Display Corporation (NASDAQ: OLED) soared 27.1% in August, according to data from S&P Global Market Intelligence, after the OLED technologist announced better-than-expected quarterly results.

To be sure, shares popped more than 13% on August 10, 2018, alone -- the first trading day after Universal Display's report hit the wires -- then it continued to drift higher from there as investors digested the news.

So what

Curiously, Universal Display's results didn't look great on the surface. Revenue declined more than 45% year over year to $56.1 million, and net income plummeted almost 80% to $10.8 million, or $0.23 per share. However, most of Wall Street was only anticipating revenue of $49.6 million, and earnings of $0.15 per share.

It's important to note, though, that Universal Display adopted new accounting standards at the start of this year that change the way it's required to recognize license fees. Under the old standards, revenue would have arrived closer to $73.6 million, and net income would have been $25.1 million, or $0.54 per share.

Even so, OLED material sales did fall 21% year over year to $36.8 million -- a change management chalked up to weak display demand from the premium smartphone market and the timing of inventory-building efforts by certain customers in last year's second quarter.

Now what

Most exciting to investors was Universal Display CFO Sidney Rosenblatt's assertion that shipments hit a "bottom" earlier this year. Rosenblatt further predicted that Universal Display expects orders to accelerate in the second half, only to be further fueled by a massive increase in OLED display production capacity next year.

In the meantime, Universal Display reaffirmed its full-year 2018 outlook for revenue of $280 million to $310 million. With shares still trading nearly 40% below their 52-week high set early this year, and given the company's impending acceleration in growth, I think the stock has plenty of room to rise from here.

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Steve Symington owns shares of Universal Display. The Motley Fool owns shares of and recommends Universal Display. The Motley Fool has a disclosure policy.