Raymond James Keeps GT Advanced Technologies (GTAT) at Underperform; Apple Event not Positive for the Stock
Raymond James affirms its Underperform rating on GT Advanced Technologies (Nasdaq: GTAT) following Apple's (Nasdaq: AAPL) September event.
Analyst Pavel Molchanov said, Heading into yesterday's Apple product launch announcement, we could not envision Apple saying anything about its plans for sapphire that would be incrementally bullish for GT, above and beyond the already lofty expectations that had been priced into the stock. Relative to these expectations, yesterday's product launch was indeed mostly disappointing for GT. Apple's unveiling of the new iPhone 6 models did not contain any reference to sapphire, though Apple's brand-new watch will have a sapphire-coated display.
...we think these top line metrics would only be achievable if sapphire were to be used for some portion of the iPhone SKUs - in other words, just the watch alone would almost certainly not provide adequate sapphire volumes. The watch's small form factor (in either the 1.5-inch or 1.65-inch models) implies commensurately limited use of sapphire material. More specifically, we estimate that its screen area is around one-fifth that of the smaller 4.7-inch iPhone model. Furthermore, the watch's starting price - once it goes on the market in early 2015 - will be $349, but there is no clarity on the sapphire pricing structure under GT's supply deal with Apple. As such, we still don't have anywhere near enough information to model precise revenue estimates for GT - which means the company's financial metrics are still a black box - though our bias is certainly to the downside.
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GT Advanced Tech closed at $14.94 yesterday.