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Why This Sapphire Supplier Looks Like a Good Long-Term Opportunity

August 07, 2014 | About:
rusticnomad

rusticnomad

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GT Advanced Technologies (GTAT) posted poor results last quarter. The declining revenue and a weak performance in the sapphire segment is impacting GT’s market share. The poor results failed to impress investors. However, GT is trying to get better, and with a strong earnings CAGR of 47.90%, it might prove to be a better investment for the future.

Quarterly performance

GT’s quarterly revenue fell on a year-over-year basis. It also missed analysts’ estimates. Investors were disappointed with the results, and the stock fell. So, GT is off to a soft start. However, GT is gearing up to deliver solid performances in the long run, and the anticipated growth trajectory of its business is consistent with its long-term targets.

GT is confident of growth in the future for many concrete reasons. With the changing dynamics in the market, the company is seeing positive response for its ASF, Polysilicon, HiCz and DSS offerings. With the demand for these solutions strong, the company is aiming for better revenue. Moreover, GT is focusing on innovations. It is bringing several new technologies, in combination with its next generation solar products. These robust moves are expected to help GT in gaining more traction in the market, raising its market share.

Looking ahead

As the company witnessed weakness in the sapphire segment, it is now focused on improving this segment to make it competitive. In line with this strategy, GT has announced that it is making its next generation ASF(R)165 sapphire growth furnace for producing high volume and high-quality sapphire material, which will be commercially available this year. This move by GT in the sapphire segment will help it tap new markets as the new system will deliver a 40% increase in boule size as compared to older versions of ASF115. This will also help in extending GT's leadership position as a provider of low-cost high-quality sapphire production tools.

Moving forward, GT is also aligning its workforce toward Arizona to complete the sapphire project. With the advances made by the company in Arizona, it is expecting a sharp production ramp up to start soon. This will help GT improve its services.

Also, the company is maintaining a healthy cash position. It has received 3 out of 4 prepayments from Apple until now. This is good news for investors, as with a good cash position, GT might make improvements in the dividend offering. The company might go for this strategy to improve its market share.

More catalysts

Moving to the other segments, GT is seeing improving demand in ASF. The company is targeting LEDs and the industrial market. Also, the acquisition of Crystal Systems in 2010, which added the ASF sapphire system to its portfolio, vaulted GT into the LED and industrial sapphire markets. In LEDs, the company is seeing good demand. It has new products in its pipeline in this segment, such as HVPE and PVD tools, which it is planning to launch by 2015.

The addition of the materials business is a smart move by GT, which will further expand its market opportunity. In addition, GT is planning to continue its three-dimensional diversification and expansion strategy. This strategy will include exploration of a high-growth market , maintaining cost effectiveness, and improving the technological advancement.

Conclusion

GT is not in a sound position now. However, the company’s prospects look strong. It expects the coming year to be a transition year in the sapphire segment. The forward P/E of the company also shows steady growth. In the long run, its strategies should result in earnings growth, making GT a solid pick.


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Comments

Atomix
Atomix - 2 months ago

Gtat from news looks dead in the water. 350M to AAPL is nothing.

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