GT Advanced Technologies (NASDAQOTH:GTATQ) is one of Wall Street's hottest stocks since Apple (NASDAQ:AAPL)  picked the company to manufacture sapphire for some of its upcoming products.

GTAT Chart

Source: GTAT data by YCharts

In the last year, the company has almost quadrupled in market value, and growth investors may be wondering if a case can be made for investing in the company at current valuations, as there are many factors to consider.

Analyzing the variables
GT Advanced Technologies started out making silicon components for the solar industry, but has since diversified into LEDs, consumer electronics, and power electronics. The company expects LED and consumer electronics to make up 80% of sales in 2014, but solar will also be a major potential growth driver.

To judge GT Advanced Technologies' growth potential, consider what Apple's deal could potentially mean. Apple is paying GT Advanced Technologies $578 million to build out its Mesa, Arizona sapphire production plant. Initial reports were that this production facility would contain 950 furnaces, an estimate that was later raised to 1,700and has since been raised again to more than 2,500 by PTT Research analyst Matt Margolis.

The difficulty with analyzing GT Advanced Technologies' potential growth is that Apple has not officially confirmed the intended use of the company's sapphire. Wall Street is assuming that it will replace Corning's (NYSE:GLW) Gorilla Glass as the iPhone 6's display. The new estimates mean that Apple would have enough sapphire for 200 million iPhones. Since it sold 160 million iPhones last year, and analysts are expecting 20% growth in iPhone sales, this assumption might prove valid.

Some people are speculating that Apple's rumored iWatch will feature a sapphire display, hence the rumors of GT Advanced Technologies' ever-expanding number of sapphire furnaces. Potentially, Apple could try to differentiate itself from its competition by fitting sapphire displays on all of its iDevices, which would require even further expansion. 

As fellow Motley Fool contributor Brian Nichols recently wrote, some analysts are speculating that Apple's shift to sapphire screens might prompt competitors such as Samsung to follow suit. Such an industrywide shift would greatly hurt Corning's growth prospects, since Gorilla Glass accounted for 11% of sales last quarter, but is expected to grow 20%-25% this year.

However, such a shift would make GT Advanced Technologies one of the fastest-growing companies in the world. Currently, analyst consensus for the company's 2015 revenue is $1.2 billion, representing 300% growth over 2013's $299 million in sales.

However, as Margolis pointed out, those estimates were based on lower assumptions, such as those by Stephen Chin of UBS, who estimated 1,500 furnaces producing 165kg of sapphire each. This would produce an estimated $1.33 billion in revenue and $1.30 per share of earnings for GT Advanced Technologies. Margolis estimated more than 2,500 furnaces, each producing 200kg-230kg of sapphire, resulting in $2 billion in Apple-related revenue and generating 2015 earnings of $2.85 per share from total revenue of $3.2 billion. His 2015 price target is $87.50, representing approximately 440% potential upside. 

Given GT Advanced Technologies' most recent quarter, where it reported just $22 million in sales, where did Margolis' $1.2 billion in non-Apple sales come from? Actually, there is another major growth catalyst for GT Advanced Technologies, and it's the reason sales might soar higher than even the most optimistic analyst projections. 

Solar: GT Advanced Technologies' $4 billion+ potential market
GT Advanced Technologies has three potentially breakthrough products in its solar division:

  • HiCZ: a new furnace that has the potential to greatly increase solar panel efficiency
  • Merlin: a new mettalization technology that reduces the amount of silver used in panels by up to 80%
  • Hyperion Ion implanter: the world's most powerful implanter, used to make solar panel substrates
GT Advanced Technologies believes that, by 2018, the annual market for its Hyperion alone is 200-250 per year, and with each machine selling for $4 million-$15 million, potential revenue from this device alone could soar to as much as $3.75 billion per year.

Foolish takeaway
Valuing a company like GT Advanced Technologies, one with unbelievable growth potential by any conventional metric, is almost pointless. Rather, its investment thesis is much like that of a small biotech start-up working on potential blockbuster drugs. Under a best-case scenario, with Apple switching all future iDevices to sapphire screens, and competitors following suit, GT Advanced Technologies could potentially become a ten-bagger, even from today's inflated prices. If its solar ambitions prove fruitful, sales from solar could equal sapphire sales and the stock could rocket even higher.

The risk is that Apple's plans for GT Advanced Technologies' sapphire is more limited, resulting in sales missing hyperbolic expectations. Due to its immensely speculative nature, potential investors in GT Advanced Technologies should keep their positions small -- no more than 1%-5% of a well-diversified portfolio. 

Adam Galas has no position in any stocks mentioned. The Motley Fool recommends Apple and Corning. The Motley Fool owns shares of Apple and Corning. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.