GT Advanced Technologies (GTAT)
From Cabot Wealth Advisory 4/10/14 Sign up for Cabot Wealth Advisory—it's free!
There are many other commodity- and cyclical-oriented names that are doing OK now, but I’m going to go back to my knitting today and give you a growth stock to put on your watch list.
The stock is GT Advanced Technologies (GTAT), which has historically been leveraged to the solar sector through its equipment that helps to produce solar modules and silicon used in solar cells. That’s still a piece of its business, but GT is now emphasizing sapphire crystal production ... and has attracted one big customer. Here’s what I wrote about the company in the latest issue of Cabot Top Ten Trader:
“GT has diversified its product pipeline to include not only equipment used to produce silicon wafers and solar cells, but also sapphire glass and the furnaces used to produce this material. Sapphire glass is a major competitor to Corning’s Gorilla Glass in the mobile and smartphone touchscreen markets. Furthermore, GT scored a major contract on the sapphire glass front, striking a $578 million deal last November to supply the glass for the next generation of Apple products. Recent reports indicate that Apple may be ramping up sapphire glass production, with MacRumors and AppleInsider reporting that Apple is looking to expand its Arizona plant. While Apple has yet to specify how it will utilize GT’s sapphire glass, a major investment in expanding product could provide a strong hint at the glass being used in the new iPhone 6. Lastly, the company’s solar cell specialty furnace business is also thriving, with GT just announcing a $58.6 million order for high temperature refractory metal furnaces—proof that the company is leveraging its acquisition of Thermal Technologies. Sales and earnings are expected to explode starting in the second half of the year.”
Indeed, on that last point, the stock looks very expensive—GTAT is up from 9 at the start of the year to 19 last week before pulling back. And it’s only supposed to make 9 cents per share this year! However, this isn’t another highflier about to get bombed—investors are looking ahead to huge second-half sales and earnings growth. Total 2014 revenues should rise 130% to $688 million, while 2015 is pegged at $1.15 billion, up 67%. Earnings for 2015 should approach $1 per share.
Fundamentally, my biggest hesitation is that GT is down the food chain a bit—as a supplier, it could easily see orders cut or delayed. That said, the story here is so new, and the money being thrown around so large, that I’m intrigued.
Also intriguing is that, despite the stock’s huge run so far this year, it’s actually holding up pretty well—it found support near 15.5 twice during the selloff in growth stocks, and is still well above its 50-day line. I’m not pounding the table on GTAT, but this is the type of new situation and story that could go far if/when the market turns up. You could nibble here with a stop in the mid-14s, or just put it on your watch list—the longer it can hold up, the better the odds it can help lead a new uptrend.
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|GT Advanced Technologies (GTAT)
243 Daniel Webster Highway
Merrimack, New Hampshire 03054
Index Membership: N/A
Industry: Semiconductor - Specialized
Full Time Employees: 541