Will GT Advanced Technologies be a Winner in 2014?

It's been a rough couple of years for GT Advanced Technologies (NASDAQOTH: GTATQ  ) , as both the solar and sapphire markets have struggled simultaneously. But 2014 could be stacking up to be a blowout year if positive trends in both industries begin to play out.

Sapphire growth to dominate 2014
GT Advance Technologies in November signed a sapphire supply agreement with Apple (NASDAQ: AAPL  ) , which came with a $578 million cash infusion to fund expansion at an Apple plant. This also gives some major validation to sapphire technology that could become popular for cover screens, LEDs, medical, and other applications. The potential in sapphire is almost unlimited, but there's also a lot of questions about who will adopt the technology. For now, progress with Apple and others are positive steps.  

In fiscal 2014, this sapphire business is expected to account for about 80% of the $600 million-$800 million in projected revenue at GT Advanced Technologies. With Apple in the picture and more companies looking for alternatives to glass, this could be a high-growth market over the long term.

Solar on the comeback trail
This year brought a rebound to solar module demand and pricing, which could lead the push to the next generation of equipment in 2014. GT Advanced Technologies was a major winner when companies like Trina Solar, Yingli Green Energy, and LDK Solar were building photovoltaic manufacturing capacity, but the demand for new equipment dried up as solar struggled over the last two years.

But end-market demand is back this year and is expected to grow again next year. The interesting part of this growth is that high quality and high efficiency module makers are selling out most quickly. If the HiCz technology GT Advanced Technologies has talked about in fact increases cell efficiency to about 25%, then manufacturers may see the need to buy new and improved equipment.

Just don't expect China to lead the way this time. Chinese solar manufacturers have built manufacturing capacity with billions of borrowed dollars, and in recent quarters it's become apparent that state-run banks don't have a big appetite to write a blank check for the next round of capacity. When I talked to him last year, GT CEO Tom Gutierrez said he doesn't expect China to be an early buyer of the next generation of PV equipment, while Eastern Europe, the U.S., and the Middle East could be interested in growing their own solar capacity.

Not only could increased solar demand result in growing demand for GT Advanced Technologies' equipment, it could shift the focal point of solar manufacturing.

Foolish takeaway
GT Advanced Technologies is uniquely positioned to experience growth from both the sapphire and solar markets, and a surge in demand could be coming in 2014. This is a stock to keep an eye on because there's still a lot of upside even after a great 2013.

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Read/Post Comments (5) | Recommend This Article (3)

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 December 26, 2013, at 5:29 PM, GirlsUnder30 wrote:

    Travis, do you seriously believe GTAT will be the main beneficiary of the upcoming solar capex? Their HiCZ has some pretty stiff competition from AMAT who is not only financially safer but offers greater synergy for products that will need to complement HiCZ to get the most out of it. You should also know that I see at least one more year before this solar capex occurs because fossil fuel will continue to remain cost effective. As far as the deal with AAPL, the net to GTAT is closer to $500 million because they have to burden all the setup. You should read: http://caps.fool.com/Blogs/about-the-apple-gtat-deal/887120

    if you haven't already and state if it changes your somewhat optimistic portrayal of this company.

  • Report this Comment On December 26, 2013, at 11:01 PM, lagunab1 wrote:

    What about sapphire for eyeglass lenses. It is heavier than polycarbonate but could make a sandwich to protect the polycarbonate lenses from scratching....which they do all the time. This would be a huge opportunity.

    @Girlsunder30 - Could you elaborate on why AMAT has a better or competitive process to HiCZ?

  • Report this Comment On December 26, 2013, at 11:02 PM, lagunab1 wrote:

    An edit here: My comments above about sapphire on eye glasses is intended as speculative as I am not skilled in the technology....comments of course welcome.

  • Report this Comment On December 27, 2013, at 10:32 AM, GirlsUnder30 wrote:

    lagunab1

    There are lots of products that can use a hard clear surface but eyeglasses and watches are clearly diminishing trends. I see a bigger opportunity in supermarket scanning beds and other OCR type applications. Please remember that GTAT is not the only sapphire solution out there but it is a very good one. The AMAT solar offering isn't necessarily better. The raw structure cell performance is comparable but to really squeeze all the performance from these new cell arrays you will need logic and all the accompanying hardware to do inspection, sorting, etc. That aspect of the business gives the clear advantage to AMAT and when you bring in the discussion on who is likely to be a stabler long term partner, GTAT will be hard to choose. Imagine the scenario if your country placed their long term solar strategy on your shoulders and you had to choose a partner to implement this strategy. I think any contract with GTAT would have sweat droplets accompanying the signature.

  • Report this Comment On December 27, 2013, at 12:45 PM, lagunab1 wrote:

    I agree watches are diminishing trends...I haven't worn mine in ....I can't remember actually. I use my iPhone. But glasses are a BIG part of life. Laser surgery is for the minority, a bit better for contacts, but everyone has sun glasses and scratching of the best polycarbonates drives me crazy. The upsell of sapphire could be a huge trend.

    You re quite correct that industrial surfaces, such as checkout windows in supermarkets would be much less price sensitive targets and I suspect many more like that. But consumer bobbles are the volume market. Early adopters alone, would saturate production. I suspect there are applications, as well today, that are unserviced due to the inability to produce a scratch free surface like this. Sapphire could grow incredibly fast if pricing and marketing are handled right.

    Lastly, it will be interesting to see if Apple can breathe new life into "watches" with a wearable computer. It will take a lot of clever out of the box thinking to come up with a compelling case for such a tiny readout...

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