Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



GT Advanced Technologies: A Battle Between Risk and Reward

GT Advanced Technologies (NASDAQOTH: GTATQ  ) isn't in full-fledged growth mode yet but the company put up decent numbers in the second quarter and reiterated its previous guidance, which should satisfy investors for now.

Revenue nearly tripled from the first quarter to $168 million, driven by $151 million from the polysilicon market. Gross margin was 35% and net income was $11.9 million, or $0.10 per share. Backlog fell $149 million, which is most concerning because there were barely any new orders coming in.  

For the full-year, management reiterated revenue guidance of $500 million-$600 million and non-GAAP earnings per share of $0.25-$0.45. While polysilicon dominated the second quarter it's sapphire that will dominate the rest of the year before the solar market reaches another growth phase next year.

A winner in the solar trade war
One of the reasons demand for polysilicon equipment may be up is due to tariffs recently put on U.S. polysilicon exports to China. GTAT CEO Tom Gutierrez said that the company's largest polysilicon customer, OCI, will benefit from tariffs because it's based in Korea and will only have to pay a 2.4% tariff.  

For the long term the market is also playing into GTAT's favor. The solar market is growing and the company should see improved demand because financial conditions are improving across the solar industry and efficiency and cost structure are improving for GTAT's products. Management doesn't expect this investment cycle to begin until late next year, but by then the HiCz product we've been hearing about should be available and set to usher in a new level of efficiency for solar cells.

Growth potential galore
The sapphire segment also shows promise if non-LED markets begin to adopt the technology. This product has been speculated to appear in products, such as smartphone cover screens, for years but adoption has been extremely slow.

There's also silicon carbide which, when combined with GTAT's Hyperion technology, could be another growth initiative. Management said that this could be as big as polysilicon was in the fast-growing solar days, although adoption is still two years away at best.

Foolish bottom line
There are simply a lot of "ifs" in the future for GTAT. If the PV market goes through another growth phase and if HiCz is adopted on a wide scale then the opportunity is huge. Non-LED sapphires could be huge if the industry finds uses for them. And maybe silicon carbide will be a growth product if it's adopted and the technology works as planned.

The challenge is that the knowns are less impressive. The stock trades at 13 times this year's earnings at best, and in the past year the company has gone from $187 million in net cash to $35 million in net cash. I still like the opportunity long term, but it will be a bumpy ride for the company over the next year and there's no guarantee of success at the end of the tunnel. High risk and high reward is what investors are getting with GT Advanced Technologies.

The energy sector is changing rapidly and investors need to weigh the risks and rewards of each investment. We've found a company that plays a vital role in key parts of the industry and will prosper for years to come. Check out the special free report: "The Only Energy Stock You'll Ever Need". Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 06, 2013, at 6:39 PM, banmate7 wrote:

    Well said. This one remains a roll of the dice. Period.

    In my view, the fortunes of this company lie with a solar turn around in the next 3 years. If the market doesn't turn significantly for the better, I suspect GTAT could run out of money. At this point, I don't believe solar offers anything compelling on the horizon, particularly in lieu of tight oil & gas development in North America.

    I nevertheless will keep my long position here. I'm actually up 25%. Nothing but faith makes me stay with GTAT, contrary to me usually being a value investor in blue chips. My faith says GTAT can survive with an anemic solar industry and emerging sapphire time for these markets to crystallize, no pun intended.

    Again, the numbers tell me this will be a merger/acquisition at some point. Maybe a fire sale. This is one time I'll let my sentiment override my brain.

    I have a $5k basis now worth about $6.2k. Can't bet big money on something like this. But so far so good. Best of luck to all here.

  • Report this Comment On November 06, 2013, at 9:12 PM, GirlsUnder30 wrote:

    Risk just took the lead, check the link below:

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2581982, ~/Articles/ArticleHandler.aspx, 9/26/2016 3:26:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
GTATQ $0.00 Down +0.00 +0.00%
GT Advanced Techno… CAPS Rating: ***