GT Advanced Tech: Sapphire cover glass opportunity not there; Sell - Canaccord $GTATNotable Calls - Wednesday, September 26th, 2012
Canaccord's Jonathan Dorsheimer downgrades GT Advanced Tech (NASDAQ:GTAT) this morning to Hold from Buy while lowering their price target to $6 (prev. $9).
- According to him, Asian meeting don't support the cover glass opportunity touted by management and Wall Street.
Despite the recent optimism and announcements, after speaking with many companies within the sapphire supply chain Dorsheimer concludes that the sapphire cover glass opportunity is not a near-term possibility using GTAT’s ASF method.
He agrees that sapphire covers can come at a premium, but the $10 to $20 price point that GT talks about are possibly consistent for aftermarket but remain 2-4x the target levels for adoption of an iPhone. Dorsheimer also agrees that by increasing charge size, changing things within the sapphire recipe like cycle time, perhaps quality, too, can reduce the cost of the crystal growth. However, the biggest roadblock that we have encountered from GT’s customers, its competitors and other equipment vendors is not necessarily the crystal growth, but the post processing.
Supplier consensus is so far that sapphire windows machined and polished from bulk sapphire boules range from the $25 to $40 for a 4” window – most of it coming from processing – well above the required range.
Asthey have previously indicated, this is an opportunity about which handset makers are seriously inquiring. However, Canaccord's meetings suggest this is Apple-driven and Samsung is heading towards more of a plastic-based OLED approach.
Canaccord says they learned that Apple has been investigating this opportunity since 2006, and Apple has signed NDA’s with many sapphire companies since. So far nobody has been able to resolve the cost/performance issues. They believe that the “signed agreements” GT has spoken about are of this nature and not purchase orders.
They continue to believe that the existence of active mobile sapphire opportunities (camera lens, SOS) and rumors of cover glass de-risks the company’s existing backlog, but they do not see any new large NT orders given what they conclude is a limited commercial opportunity.
Notablecalls: This is a significant call as Canaccord was first to upgrade GTAT on August 17, a day after management touted the sapphire cover glass oppy at Canaccords' growth conference. Other analysts followed and as you can see from the increased trading volume the comments didn't fall on deaf ears.
Now it appears lots of fast money types are buried in the name after the co so conveniently issued a convert and now Canaccord comes in saying all this sapphire hype was for..pretty much nothing. No Apple deals on the horizon, not by a long-shot.
Goldman murdered Veeco (NASDAQ:VECO) with their downgrade two days ago saying LED capital equipment market isn't going to recover much in '13-'14. Ugh.
I think this downgrade will take GTAT closer to $5/share level today. Below $5 in a week?
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