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GT Advanced Technologies: Benefit from Sapphire Technology with This Stock

June 06, 2014 | About:
jaggom

jaggom

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GT Advanced Technologies (GTAT) is marching aggressively toward its target of achieving $1 billion in revenue in 2015, and earnings of $1.50 per share in 2016, respectively, despite not-so-impressive first-quarter results. It posted loss of ($0.22) per share, which is in line with the Capital IQ consensus estimates.

Revenue for the quarter was at $22.5 million, 16.5% below the consensus estimate of $26.94 million. However, the results were the best fit to the circumstances as it is undergoing a transformation as its sapphire materials business ramps up. The results also were in line with its guidance to the end point of the range it expected at the binging of the quarter.

Good Moves

GT Advanced incurred non-GAAP operating expenses of $43.4 million, consisting of $23.5 million in research and $19.9 million in selling and general during the quarter. Also, the company is engaged in investing in new product offerings that will certainly supplement its growth in the future. It looks like to me as if the company is laying a strong foundation for 2015 and coming years as it considers 2014 a period of transition.

Also, it expects revenue of $600 million to $800 million and earnings of $0.02 to $0.18 a share. Analysts, on the other hand, expect revenue of $693.8 million and earnings of $0.10 a share, while its non-GAAP capital expenditure is expected to be in the range of $150 million to $160 million for the year. Therefore, it suggests that the company is quite upbeat about its long-term prospects and could be a strong performer in the long run.

Investments Ahead

In addition, the company is planning to invest nearly $600 million in capital expenses, weighted toward the first half of the year, which is an additional investment the company is making in Merrimack. These numbers along with strategic initiatives will certainly compensate the weak performance the stock had witnessed when the results were declared. Also, the sentiment on GT remains positive overall and many investors are seen rolling back on the stock of late that has created healthy volume in the market backed by strong relationship the company shares with Apple (AAPL).

Looking ahead, GT looks solid and confident in the future for couple of reasons, such as the continued positive trend it has experienced across its ASF, Polysilicon, HiCz and DSS solutions, which are at the moment skyrocketing. Second, the company is on the brink of bringing in several new game-changing technologies, which will certainly help the company to market its next generation solar product such as ASF 165, low-cost high-quality sapphire material that has huge potential for its addressable market and is expected to be available in the market at the beginning of third quarter of 2014.

The ASF (R) 165 will also be available for its new customers, targeting the LED and industrial markets. The production is in progress in the Arizona plant in the U.S. with a production furnace capable of producing high-quality 165 kilogram boules in high volume. The ASF 165 will definitely give its customers a competitive advantage and lower cost of ownership, by providing a sapphire furnace that will significantly increase capacity and reduce costs as it provides 40% increase in Boule size compared to the current ASF 115. In addition, the company is anticipating strong demand for this product category in the coming months.

Conclusion

As mentioned above, GT Advanced Technologies looks like an attractive investment for several reasons, such as its anticipated growth trajectory of its business and on the higher side because of its strong end-market prospects, its HICz and PV technologies experiencing greater momentum, expanded projects with Apple, and potential for its new polysilicon technology business. Also its HiCz solutions are now available commercially and the company has experienced high volume in this regard as customers have accepted the revolutionary Merlin solar interconnect technology.


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