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LPL opportunity +4

10:45 14-Apr-16


It's hard to say what's causing the out-sized drop in LPL this morning.  I have mentioned some risk for the upcoming financial report, but recent news only serves to mitigate that.  Most of the news that I do see is actually good.  The only weak point is continued concern over iPhone demand, and that doesn't even cite LG Display.  There are also rumors about the iPhone 7, which seem to indicate that it will use an LCD screen, but that would primarily impact Samsung, not LG Display.

On the positive side, LGD continues to lead in LCD manufacturing, AMOLED TV and lighting, and touch screen technology.  The company will be giving a cornerstone talk at the Printed Electronics Expo at the end of the month.  Such talks occasionally provide interesting details on the roadmap.  The continued progress in AMOLED televisions is most important, though, and that brings us to the most likely culprit, which is the introduction of new QDTVs from Samsung, which I've been anticipating for a while.  As already written, these will give AMOLED models a run for their money in terms of color replication, but not contrast.  Crucially, although the headline gives a different impression, these sets are NOT price competitive with comparable AMOLED models, so I don't see them as much of a threat.  Furthermore, leading indicators to show LCD competition, including from Samsung, dropping out the market resulting in improving margins for the survivors like LG Display and AU Optronics.  That speaks to my original thesis of LGD being able to out-compete legacy rivals with superior mass-production economics.

Consequently, I see this as a big opportunity for those who may have missed out on January and February LPL pricing.  It may be that the market will realize its error in a week or so, with the upcoming report and dividend.  Whether or not that happens, LPL currently looks like a buy for the long term, with unmatched growth prospects and valuation metrics:
Price to Book
 Price to Sales
 Price to Cash Flow
0.81
 0.35
 3.0