It's been a rough couple of years for GT Advanced Technologies (NASDAQ: GTAT), 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.
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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