Why GT Advanced Technologies Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of GT Advanced Technologies (NASDAQOTH: GTATQ  ) jumped more than 26% during intraday trading Tuesday after the company significantly missed earnings expectations, but simultaneously announced a deal to supply sapphire material to Apple (NASDAQ: AAPL  ) .

So what: Quarterly revenue came in at just $40.3 million, badly missing estimates which called for sales of $92.5 million. Meanwhile, that translated to an adjusted net loss of $0.16 per share, which also fell short of expectations for a loss of only $0.01 per share on the same basis.

However, GT Advanced Technologies also stated it has entered into a multiyear supply agreement with Apple, under which it will own and operate Advanced Sapphire Furnaces to produce sapphire material for use in the Cupertino-based tech giant's wildly popular devices.

Now what: Apple is also providing GT with a prepayment of roughly $578 million, for which GT will reimburse Apple over a five-year period starting in 2015. That'll help the smaller company get its new operations up and running, including a new facility in Arizona where GT expects to employ more than 700 people.

It's also worth noting management was quick to add the caveat that, despite continued sapphire manufacturing cost improvements, gross margin from this new materials business is "expected to be substantially lower than GT's historical equipment margins." However, given the current continued weakness in its core photovoltaic solar business, it's safe to say that's a trade-off they're willing to accept.

That said, and as I suggested earlier this year, I'm still convinced GT's PV sales will rebound over the next few years. When that happens, and given GT's newfound stability from Apple, patient long-term investors will be glad they didn't take profits today.

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Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On November 05, 2013, at 5:21 PM, GirlsUnder30 wrote:

    Here's a little more information about the Apple GTAT deal:

    http://caps.fool.com/Blogs/about-the-apple-gtat-deal/887120

  • Report this Comment On November 05, 2013, at 8:33 PM, SELLmtg wrote:

    GTAT has a lot of shorts, the short sellers should

    cover you short position NOW before GTAT goes up to above $90. soon.

    GTAT will have a market cap = or > than GLW's market cap. This means GTAT's market cap will be greater than $20. Billion dollars. (Note: GLW did not get the contract, GTAT did)

    GTAT is a buy. Buy, Buy, Buy.

  • Report this Comment On November 05, 2013, at 8:35 PM, SELLmtg wrote:

    GTAT's short sellers should cover your short positions NOW.

  • Report this Comment On November 06, 2013, at 9:25 AM, GirlsUnder30 wrote:

    SELLmtg

    Did you notice that 25 million shares traded yesterday? Who do you think sold all those shares? It's nice to be optimistic but you should review the link above on that deal to sober up about GTAT.

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