UBS Lowers PT on GT Advanced Technologies (GTAT) to $13 Ahead of Business Update (AAPL)
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Rating Summary:
4 Buy, 7 Hold, 2 Sell
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Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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UBS lowers its price target on GT Advanced Technologies (Nasdaq: GTAT) from $17 to $13 and maintains a Neutral rating on the stock.
Analyst Stephen Chin noted low sales in August to Apple (Nasdaq: AAPL), with revenue of $4 million coming from 2 million two-inch equivalents (TIEs). This is not too surprising since iPhone 6 cover screens did not use sapphire. This compares to our checks last month of sales near $2M and 1M TIEs, which does show GT’s factory is slowly ramping after production start-up challenges in May. We believe GT’s sapphire could be for Apple Watch in early 2015 as the supply chain bought sapphire for the iPhone5s home button 5 months before the launch. But, we look for monthly sales over 3M TIEs to gain confidence GT is on Apple’s Watch and keep a Neutral rating,
the analyst said.
On the company's business update this week: We continue to believe Apple’s 4th and final cash prepayment to GT for $139M could be a binary catalyst for the stock. GT guided that the prepayment may be made by the end of October but we’re uncertain of the deal conditions. If one of Apple’s conditions is GT fully ramping its sapphire factory, we estimate the factory was only running under 10% of its nameplate capacity last month (we estimate around 32M TIEs), making it challenging. But if a condition is # of furnaces that are operational, this would be more optimistic. Our lack of conviction on Apple’s final prepayment to GT keeps us Neutral as we believe failure to do so could be an overhang, leading GT to raise capital next yr.
For an analyst ratings summary and ratings history on GT Advanced Tech click here. For more ratings news on GT Advanced Tech click here.
GT Advanced Tech closed at $11.27 yesterday.
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