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) plunged 11% today after UBS downgraded the solar and LED equipment company from buy to neutral.
So what: Along with the downgrade, analyst Stephen Chin reiterated his price target of $22, representing just 13% worth of upside to Thursday's close. So while momentum traders might be attracted to GT's year-to-date price strength, Chin's call could reflect a sense on Wall Street that the risks surrounding the company's growth trajectory are being largely overlooked.
Now what: UBS lowered its 2014 earning-per-share and sales outlook for GT from $0.17 to $0.12 and from $800 million to $700 million, respectively. "Our monthly checks found GT had a successful month of May at its Arizona sapphire fab and estimate it shipped 1.6M two-inch equivalents (TIEs) of sapphire (up 60% m/m) to one of Apple's cover screen suppliers," said Chin. "However, we expected 4.0M TIEs in May (up 3M m/m) and instead only saw an increase of 600K m/m, less than the increase seen in April of 800K (was 1M, up from 200K), and we are not sure why the ramp slowed. ... We believe GT can still hit the midpoint of its sales guidance of $600-$800M but believe our checks of a slower ramp in 2Q14 makes the high end more challenging." When you couple that downbeat view with GT's still-pricey forward P/E above 20, it's tough to disagree with UBS' cautious stance.