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LG Display 2Q16 earnings preview and Intel ?3

13:06 19-Jul-16


LG Display will announce earnings for the second quarter on July 27th.  Analyst projections average out to a loss of 6 cents per share, on revenue of $5.4b, with the current quarter guiding towards $5.6b in sales.  It's taken a little longer than expected, but we're now seeing the original short to medium-term portion of my thesis playing out in the form of LGD out-competing its LCD rivals with scale.  That can and should last until AMOLED starts to really take over, next year, which involves some execution risk.

As of last quarter, the AMOLED TV business was still a money loser and that is expected to change this year.  An article published this morning in the Korea Herald attempts to spin things positively by saying that production quintupled YoY to 140K.  I suppose that documents production capacity and yield improvement, but a QoQ comparison to 145K for the first three months of the year is more relevant.  The drop in quantity is probably mostly due to an increase in average panel size again, so there is no real cause for concern there.  I can also agree that AMOLED TVs continue to gain traction with consumers as prices come down and more vendors buy panels from LG Display for their own offerings.  This quarter and the next few will really be the time to start looking for profitability from the AMOLED operations, though.  We'll see what management has to say about that and second-sourcing to the likes of Apple.

In the meantime, the stock is being helped by an upgrade from Bank of America.  Although I continue to look for a bright long-term future in LPL, I worry that pricing over $13 leaves the stock somewhat vulnerable to market pullbacks and/or post-earnings disappointment.

Speaking of which, it's also worth mentioning that Intel reports earnings after the bell tomorrow.  The stock is well above the level where I might consider buying it.  In fact, those who don't mind short-term gains, or who were already holding shares when I added the stock to the pick list, might consider taking profits ahead of earnings.  Those who did add in August of last year don't have much longer to wait for an improved tax rate, in most cases.  While earnings reports are always dangerous, I do not see any extreme level of it in this case.  I will, of course, be watching to see how recent corporate changes translate to the bottom line for the short term.  More important will be any real details on the various technology platforms, particularly 3D Xpoint.  Those are typically hard to come, though, and I won't publish anything for a routine report this time around.  Questions are always welcome, though.