What Might GT Advanced Technologies Announce On September 29, 2014?
Sep. 18, 2014 1:44 AM ET | 59 comments | About: GT Advanced Technologies, Inc. (GTAT)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
•GTAT stock price is still falling.
•Company announced a conference call for later this month that will move shares.
•There are 5 things company might address on call.
GT Advanced Technologies (NASDAQ:GTAT) severely disappointed investors when Apple (NASDAQ:AAPL) revealed neither the iPhone 6 nor the iPhone 6 Plus would have a sapphire screen. The only winners from the bad news were short sellers. The stock traded recently at $11.63, but is still higher than its breakout price of just under $9. For the next few quarters, investors should still expect speculation on how much sapphire Apple will use for upcoming and future products. Since GTAT is bound by a confidentiality agreement with Apple, what matters in the near term is the update the company will give to shareholders on September 29th 2014.
GTAT Chart
GTAT data by YCharts
GT Advanced "announced that it will be holding a webcasted conference call the week of September 29th, after the close of its current quarter, to provide a business update." There are five things the company might address on the call.
1) Insider selling
Insiders acquired and immediately sold $485,216 worth of shares, or 28,533 units, on September 6, 2014, thereby avoiding $154,000 in losses:
Date
Owner
# Shares
A = Acquired, D = Disposed
Sale Price
Total
9/6/2014
VP, Chief Admin Off, GC
6,652
A
$0
9/6/2014
VP, Chief Admin Off, GC
3,136
D
$16.70
$52,371.20
9/8/2014
VP, Chief Admin Off, GC
3,516
D
$17.39
$61,157.66
9/6/2014
Exec.VP, Solar Business
6,652
A
$0
9/6/2014
Exec.VP, Solar Business
3,189
D
$16.70
$53,256.30
9/6/2014
President and CEO
15,902
A
$0
9/6/2014
President and CEO
6,670
D
$16.70
$111,389.00
9/8/2014
President and CEO
9,232
D
$17.38
$160,448.47
9/6/2014
VP, Asia Ind Furnace
6,652
A
$0
9/6/2014
VP, Asia Ind Furnace
2,790
D
$16.70
$46,593.00
Source: SEC
If the timing of the Apple announcement was not material, executives should have held their shares. The sale is a small amount, but holding the shares would signal that management was confident the value of the company would rise.
2) Update on Merlin initiative
On its Q2 conference call on August 5, the CEO indicated that the response from partners and potential customers for Merlin was strong. During the quarter, the company successfully completed the performance, safety, and quality testing phase. GTAT shipped samples to several customers and was in active discussions with them. There is a high likelihood that the company will announce signed deals with them on September 29th.
Merlin offers great potential for revenue that current shareholders are ignoring due to the iPhone-sapphire disappointment. If 20 percent of the PV market adopted Merlin, it would mean $1 billion in revenue for GTAT.
3) No major update on Hyperion initiative
Hyperion is a tool that is involved in producing ultra-thin sapphire, silicon laminates, silicon carbide, or templates. GTAT thinks it could get its first order for BNCT Hyperion accelerator in 2014. However, a commercial deal probably will not happen until later in the year.
4) No change in earnings guidance
To the surprise of many bears, GTAT may not lower its non-GAAP forecast of $1.50 per share for 2016. Revenue from all initiatives will be more meaningful in 2015. It is possible that the company will lower 2014 revenue estimates, but unlikely. Still, this would happen if a delay from producing sapphire at high enough yields was one of the reasons Apple delayed the release of its Apple Watch.
Investors should expect product delivery in Q3 and Q4 to materialize. This means that while Q3 may meet forecasts, Q4 will be even stronger.
5) Re-affirming healthy balance sheet
To re-assure investors, GTAT may reiterate that it has a healthy balance sheet. The company forecasted $400 million in cash by the end of this fiscal year.
Bottom line: sapphire a 2016 story
Investors are understandably disappointed GTAT is not supplying sapphire for iPhone screens. Manufacturing and ramping up production of the material takes time, but Hyperion and Merlin are even more meaningful for the company. Sapphire was unusually a higher percentage of total revenue (at 80 percent). This will not be GT Advanced's revenue mix once development for its other products complete and are ready for shipment.
Ironically, the stock might rally on no new news for sapphire. Speculators who bid the stock will take a loss. Investors with a one to three-year time horizon will eventually reap the reward.
