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Universal Display (Nasdaq: PANL) has been hammered by selling since it announced disappointing third quarter earnings after the close on Wednesday. As reported by colleague Scott Rubin, the shares were trading at $19.45 after hours, down a whopping 42 percent from the close of $33.40. During regular trading on Thursday, the shares hit a low of $21.55 before rebounding slightly and stand at around $23.20 at midday.

Universal Display announced a third quarter loss of $0.12 per fully diluted share compared to a profit of $0.12 per fully diluted share in the third quarter of 2011. Third quarter revenue fell to $12.5 million from $21.8 million a year ago largely due to declines in materials sales and royalty and license fees.

While Universal Display cannot be classified as a “value” stock—Benjamin Graham would not touch it with a barge pole—I believe the selling is overdone and that investors are being given an opportunity to buy the shares at a very attractive price.

Universal Display owns most of the basic patents for organic light emitting diode (OLED) technology. The company has taken those patents and, in partnership with several universities, including Princeton and the University of Michigan, has developed key materials for OLED displays, which it sells to manufacturers such as Samsung Display of South Korea and Konica Minolta of Japan.

Samsung Display is the company's largest customer, accounting for 54 percent of revenue in the third quarter and 63 percent of revenue in the nine months ended September 30, 2012. You can find Universal Display's technology in Samsung's high-end smartphones including the Galaxy Nexus, Galaxy S III and Nokia's (NYSE: NOK) Lumia 900.

But smartphone displays are only a small part of the OLED story. Samsung and LG both displayed 55-inch AMOLED (active matrix OLED) televisions at the Consumer Electronics Show in Las Vegas back in January. AMOLED TVs were supposed to be marketed by the end of this year but this has been delayed until 2013.

Universal Display President and CEO Steve Abramson told investors on the third quarter conference call, “According to a Korea Times article by the industry sources both Samsung and LG Electronics' OLED television will not be available on stores this year. A DisplaySearch official is closing [sic] the total shipments for OLED TV this year will be 500, down from the 50,000 we have previously expected.”

Abramson continued, “Despite the delays according to the DisplaySearch we are just a year away from a $1 billion OLED TV market, 2014 at which point growth will ramp and the market will reach $16 billion before the end of the decade. And a recent oled-info.com article, LG's Chairman still plans to devote the company's main R&D resources towards the development of OLED TV.”

If you are not familiar with OLEDs, they have a number of advantages over liquid crystal displays (LCDs) that are widely used in flat screen televisions today. The most basic difference between an LCD and an OLED is that an LCD must be constantly backlit and produces a color image by blocking portions of the light shining through the display. An OLED needs no backlight. The light-emitting diodes produce light directly. This means that an OLED can produce bright, vivid colors while consuming less power and producing less heat.

Since there is no need for a backlight or cooling, OLED displays can be made thinner and can produce an “edge-to-edge” image, unlike LCDs.

But there is a lot more that OLEDs can do. Several years ago, Universal Display discovered that OLEDs can be printed onto flexible plastic substrates, which means that displays can be folded or rolled up when not in use. Imagine a full-color, lightweight Kindle or other electronic book that could either be folded up into something the size of a pack of cards or rolled into something the size of a pen.

Perhaps the most exciting application for OLEDs is lighting. OLEDs can be tuned to create any type of light. OLEDs printed onto a flexible plastic or metal substrate can be folded or cut into any shape desired. One mundane but really useful application is for under cabinet lighting in the kitchen. The entire bottom surface of a cabinet could be covered with a paper-thin OLED sheet that would provide bright, even lighting for your kitchen counters while generating almost no heat.

OLEDs can also be transparent. Imagine a picture window with a transparent OLED film that becomes a light at night (becoming opaque from the outside for privacy) or a picture window sized television. Even George Jetson didn't have anything like that!

Since Universal Display holds many of the basic patents for OLEDs, anyone who wants to produce OLEDs has to license the technology from them. In addition, Universal Display produces the phosphorescent materials used to emit red, green, yellow and light blue light from OLEDs. The company has also developed plastic encapsulating materials needed for standard and flexible OLED displays.

Industry analysts expect that OLED will become the dominant technology used in televisions and will also take a significant share of the lighting market by the end of the decade. 2013 will mark the start of the OLED TV era. OLED TVs are expected to be the “must have” gift for the 2013 holiday season.

Management remains confident that the third quarter is a temporary setback and that the roll out of OLED TV will take place as expected next year.

Universal Display's patent portfolio is the company's main asset. The company has just under $5.00 per share of cash and near cash on the balance sheet, which offers investors a small cushion but is not enough to classify Universal Display as a value stock.

If you are going to invest in Universal Display, you need to take a longer term view—at least out to 2014—and you have to believe in the technology. Above $40, the shares had gotten ahead of themselves. Closer to $20, investors are being given a great opportunity to participate in the company at the center of what will be the next big thing in consumer electronics.

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