GT Advanced: Too Many “What-Ifs” Keep Us On The Sideline, Says UBS


In a research note published today, UBS analyst Stephen Chin maintained a Neutral rating on GT Advanced Technologies (NASDAQ:GTAT) following the company’s second-quarter results, and lowered his price target to $17 (from $22) to reflect some of the inherent near term challenges of ramping a new sapphire factory and the highly back-end loaded nature of 2014 sales.

The following bullets contain some highlights from this report: 

  • We are still not sure if any of Apple’s initial iPhone6’s will have sapphire covers as GT lowered its 2014 sales guidance midpoint by $50M given challenges ramping its sapphire factory in 2Q14 (in-line with our 7/7/14 downgrade). We now estimate GT’s sapphire sales to Apple this year will only be $210M ($360M previously). But this still represents about 95M TIEs which is enough for 21M screens for a larger 5.5″ iPhone and leaves an opportunity that a version may have a sapphire cover. We estimate GT’s stock could move 10%+ either direction the day of Apple’s iPhone launch possibly in September. Separately, GT reported its sapphire factory is 6 months late and expects to meet operational targets to receive Apple’s final prepayment of $140M by October. GT expressed confidence it can meet the deadline and have its cash balance end at $400M making a capital raise unlikely. We estimate the stock could move c10% either direction if GT receives or has pushed out its final prepayment in October. We will rely on our monthly sapphire checks to help us gauge the status of their factory.
  • GT did not give 3Q14 sales guidance other than it is 4Q loaded and we estimate 3Q14 sales of $115M and a big ramp in 4Q14 sales to $450M. GT also now expects to ramp its sapphire factory in early 2015 versus our prior view of 2H14. Our new 2015 and 2016 EPS are $1.20 and $1.50 compared to $1.30 and $1.60 previously.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Stephen Chin has a total average return of 20.3% and a 81.0% success rate. Chin has a 20.3% average return when recommending GTAT, and is ranked #157 out of 3263 analysts.

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