Goldman Sachs Comments on GT Advanced Tech's (GTAT) Q1

Goldman Sachs maintained a Buy rating on GT Advanced Tech (NASDAQ: GTAT). Comments follow Q1 results. Analyst Brian Lee views results as mixed.

Lee said:

"Analysis

(1) Lower-than-expected revenue. 1Q14 revenue of $22.5mn was below our $28.5mn view as strong PV/sapphire sales of $13.2mn/$5.6mn (vs. our $5.0mn/$3.5mn) were offset by poly sales of $3.7mn (vs. our $20.0mn).

(2) Sapphire ramp resulted in lower margin. While PV and polysilicon non- GAAP gross margins of 37% and 57%, respectively, compared favorably vs. our 25% and 38% expectations, negative sapphire margin in the quarter – driven by the continued build-out of the Arizona facility – caused total non- GAAP gross margin to slip to roughly 9% vs. our 25% estimate.

(3) Pickup in equipment orders. 1Q14 orders of $29mn beat our $22mn view, mainly owing to PV orders of $15mn, which came in well ahead of our $0mn estimate. Total backlog was $609mn to end 1Q14, with GTAT noting an additional $58mn in furnace orders after the quarter’s close.

(4) Apple prepayments on track. GTAT received its second prepayment (out of four) of $111mn from Apple in 1Q14 and reportedly received a third prepayment of $103mn at the beginning of 2Q14.

(5) Capex ramping. Though capex was not provided, the qoq increase in PP&E implies capex north of $200mn, which we assume is mainly for the Apple facility. GTAT previously guided 2014 capex to $500mn-$600mn."

For an analyst ratings summary and ratings history on GT Advanced Tech click here. For more ratings news on GT Advanced Tech click here.

Shares of GT Advanced Tech closed at $15.36 yesterday.

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