If Apple Adopts OLED, It Could Kill This Stock

Shares of LG Display Co Ltd. (ADR) LPL have gained 13 percent since January 15. Macquarie’s Daniel Kim downgraded the rating for LG Display from Neutral to Underperform, saying that the recent run-up in shares “belies the confluence of new challenges confronting the company."

Near-Term Downfall

LCD panel prices have been relatively stable in March 2016. Analyst Daniel Kim pointed out, however, that this should not be considered as “a sign of the market stabilizing.” Rather, this could be on account of two unexpected “supply hiccups,” namely the earthquake in Taiwan on February 6 hurting Innolux’s capacity and issues at Samsung Display.

Kim noted that these issues were short-lived and “unlikely to arrest the downward spiral in LCD panel prices.”

A Grave Challenge

In case Apple Inc. AAPL adopts OLED for its future iPhones, this could represent a “grave challenge” for LG Display, the analyst commented. LG Display is behind Samsung in terms of mobile OLED technology, with limited capacity. “Its balance sheet would be stretched in coming years to finance both mobile and TV OLED fab capex amidst depleting internal cash flows,” Kim commented.