On Thursday, UBS analyst upgraded LG Display Co (NYSE:LPL) Ltd. (034220:KS) (NYSE: LPL) stock from Sell to Neutral, while slightly reducing the price target to KRW10,000.00 from the previous KRW10,200.00.
The adjustment comes after observing a significant decline in the company's share price over the past six months, with InvestingPro data showing a 33.75% drop and the stock trading near its 52-week low of $3.05. The decline is attributed to concerns about decreasing demand for iPhones and potential downturns in TV and IT set demand.
Analyst noted that LG Display (KS:034220)'s stock is now trading at 0.65 times its next twelve months (NTM) book value, suggesting that the initial investment thesis has largely played out. InvestingPro analysis reveals concerning financial metrics, including a weak current ratio of 0.65 and significant debt burden, though revenue grew 23.27% in the last twelve months.
Looking ahead to 2025, the analyst sees a more balanced situation for the company. Analyst anticipates that LG Display could expand its mobile OLED market share to approximately 35%, up from around 30% in 2024, with its largest customer, thereby increasing revenues from RGB OLED displays by 11% year-over-year.
The analyst highlighted the potential for LG Display to benefit from the iPhone 17 series expected later this year, which is likely to transition to an all-LTPO display lineup. This shift could lead to market share gains for incumbent LTPO suppliers like LG Display and Samsung (KS:005930) Display Co (SDC) over competitors such as BOE Technology Group Co.
Furthermore, Lee pointed out that as depreciation and amortization expenses for the E6-1/2 RGB OLED capacity wind down after 2024, LG Display could see an improved cost structure. However, he also cautioned that the main risk moving forward is the increasing pressure on original equipment manufacturers (OEMs) to manage bill of materials (BOM) costs, which might lead to additional price pressure on average selling prices (ASPs).
In other recent news, LG Display Co., Ltd. has experienced several significant developments. Despite an operational loss of W81 billion in the third quarter of 2024, largely attributed to weaknesses in IT OLED demand and a one-off expense exceeding W100 billion for voluntary retirements, the company reported a quarter-over-quarter revenue increase of 2%.
This growth, marking a substantial year-over-year increase of 43%, was primarily driven by small panel shipments, such as smartphone displays.
Citi has responded to these developments by downgrading LG Display's stock rating from Buy to Sell and significantly reducing its price target for the company's shares. The firm's revised stance reflects concerns over LG Display's ability to navigate an increasingly competitive landscape, especially with rivals like BOE and Samsung in the fray.
Despite these challenges, LG Display remains optimistic about its future. The company anticipates growth in TV and notebook PC panel shipments and an increase in the average selling price for the fourth quarter.
Furthermore, the company's sale of the Guangzhou LCD TV fab is expected to close by the end of Q1 2025, which could potentially contribute to improved cash flow and financial stability. These are among the recent developments for LG Display.
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