GTAT Stock Soars on AAPL Deal

by Alyssa Oursler | November 5, 2013 11:27 am

GTAT Stock Soars on AAPL Deal

GTAdvancedRAIfinal GTAT Stock Soars on AAPL DealGT Advanced Technologies (GTAT[1]) — a diversified tech company in the solar, LED and electronics industries — opened more than 20% higher today on news of a supply deal with Apple (AAPL[2]).

Shares of GT Advanced Technologies have now more than tripled year-to-date, and in fact, GTAT stock is trading in the double-digits for the first time since its 2011 peak.

AAPL stock didn’t budge on the news, and still remains slightly in the red since Jan. 1.

Sapphire Shines for GTAT

GTAT stock investors were excited this morning for one simple reason: sapphire.

See, the specifics of the GTAT and AAPL deal are as follows: Apple is building a new component manufacturing plant in Arizona, and GT Advanced Technologies has entered into multiyear agreement to supply sapphire materials at the plant. As Apple Insider[3] put it:

“Apple’s investment is a prepayment funding the accelerated development of the GTAT next generation, large capacity Advanced Sapphire Furnace, which is designed to produce high quality sapphire material at a breakthrough low price.”

Sapphire, known for hardness, is thinner, stronger and more scratch-resistant than other cover glass like Gorilla Glass … but is also much more expensive. The deal suggests that Apple likely will use sapphire in future hardware, possibly including the next Apple iPhone that comes out in 2014.

On top of that, sapphire already is used in the camera lenses and the home button of the Apple iPhone 5S.

The deal between GTAT and AAPL also affected other suppliers. Gorilla Glass supplier Corning (GLW[4]) opened to 3% losses this morning. Sapphire vendor Rubicon (RBCN[5]), meanwhile, opened to 14% gains, riding on the potential of higher industry demand.

As The Wall Street Journal[6] explained:

“Demand for sapphire ingots used to make substrates for electronics applications — driven by LEDs and mobile phones — is expected to grow by more than 50% by 2016 from this year, according to the research firm IHS.”

Another takeaway: The agreement is just the latest sign that AAPL is focusing more on domestic production — potentially because there has been so much criticism of Taiwan-based Foxconn making the Apple iPhone and other products. Meanwhile, GTAT is a homegrown small-cap stock based in New Hampshire and a member of InvestorPlace’s Real America Index[7].

Still, at the end of the day, the biggest news — as evidenced by the outsized stock movement — is about GTAT and its shift toward sapphire. While GTAT used to be thought of as a solar stock, the company has been gradually diversifying.

Considering GTAT expects sapphire to contribute approximately 80% of 2014 revenue in the wake of the AAPL deal … well, maybe it’ll soon be thought of as a “sapphire stock.”

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. GTAT: http://studio-5.financialcontent.com/investplace/quote?Symbol=GTAT
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. Apple Insider: http://appleinsider.com/articles/13/11/04/apple-signs-578m-sapphire-deal-with-gt-advanced-technology
  4. GLW: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLW
  5. RBCN: http://studio-5.financialcontent.com/investplace/quote?Symbol=RBCN
  6. The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702303482504579178243297569168
  7. Real America Index: http://investorplace.com/real-america-index/#.UnkCbXCsiSo

Source URL: http://investorplace.com/2013/11/gtat-aapl/
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