GT Advanced Technologies Falls 15.6% on Analyst Downgrade

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GT Advanced Technologies (GTAT) shares fell 15.6%, touching a low of $16.45, before closing a notch higher at $16.50. The decline came as a result of a downgrade from Buy rating to Hold by the research firm Canaccord. Another firm, UBS also downgraded its rating to Hold from Buy.

Canaccord’s analyst, Jonathan Dorsheimer, revised the rating on expectations of lower-than-expected earnings growth, primarily due to skepticism surrounding the demand for sapphire cover glass in the near term.

Per Dorsheimer, the company’s earnings growth remains unlikely unless Apple (AAPL) chooses to use sapphire cover glass for all its upcoming devices, including iPhones and iWatches. Moreover, according to the analyst, only a few Apple iPhone6 models will have a sapphire display.

Furthermore, UBS analyst, Stephen Chin, remained cautious on account of slower-than-expected ramp up of the Sapphire glass at the Arizona facility in May this year. The analyst also reduced his 2014 revenue and EPS expectations by $100 million and 5 cents to $700 million and 12 cents, respectively, but maintained the price target at $22.00.

Additionally, the company has not witnessed much change in the current year estimate revisions over the past few weeks. The first-quarter results were weak with revenues decreasing 31.0% sequentially and 156.9% year over year to $22.5 million. The recent price fall is also discouraging and so it is important to keep a close watch on this firm in the near future.

GT Advanced Technologies is a diversified technology company which offers crystal growth equipment and solutions to global solar, light emitting diode and electronics industries.  However, the company’s shares are still up 80% year-to-date on the back of its agreement with Apple to supply sapphire glass for its upcoming devices.

Though GT Advanced Technologies is making aggressive moves to satisfy the expected demand from Apple, it is important to improve its sapphire technology and focus on capacity expansions to drive real growth.

Currently, GT Advanced Technologies carries a Zacks Rank #3 (Hold). Other stocks worth considering in the same sector are Advanced Micro Devices, Inc. (AMD) and Avago Technologies (AVGO), both sporting a Zacks Rank #1 (Strong Buy).

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