3/17/14 Roundup: Upgrades, Apple Upgrade Cycle, Merlin and TG’s Interview on CNBC

Analyst Reaction to 3/14/14 Technology Conference

Goldman Reiterates Buy Rating:  GTAT affirmed its EPS goal of over $1.50 by 2016, though Goldman sees the estimate is conservative given the $4 to $5 billion market opportunity that awaits before factoring in its Apple.   GTAT could see large upside from Hyperion.  The analyst doesn’t see sapphire lamina being included in the upcoming Apple iPhone 6.

UBS Ups PT to $22: UBS sees GTAT new product sales offsetting some sales exposure to Apple, which will be a long-term positive for the company. HiCZ furnaces making mono-crystalline solar wafers (estimate $1bn market by 2017).We estimate equipment gross margin to be in a range of 35-40% and materials gross margin to be in 25-30% range. We expect Hyperion for sapphire and Merlin for solar to be the most meaningful contributors to GT’s sales in 2016 with initial orders expected in 2H14 UBS concluded.

Canaccord Reiterates $21 PT: “We reiterate our buy rating on GTAT shares as we believe the Apple opportunity plus the recovery in the solar market should allow the company to exceed Street expectations,” Canaccord analysts Jonathan Dorsheimer and Josh Baribeau wrote in a Monday research note. “Additionally, GT has an increasing number of ‘irons in the fire,’ which reduces diversification and customer concentration risks.”

Credit Suisse Ups PT to $26: Takes 14’/15’16’ EPS estimates from $0.13/$1.38/$2.12 to $0.14/$1.49/$3.00.  Takes 14’/15’16’ Revenue estimates from $717m/1,559m/2,123m to $728m/$1,643m/$2,747m.  “the other businesses in polysilicon equipment, ingot equipment, sapphire equipment, and new products like Hyperion for thin laminates and Merlin for cell grids deserve more credit in the valuation and will likely lead to higher consensus estimates, especially as orders resurge in late 2014 and early 2015”.

Obscure Analyst Ups Target: $75-100: “2015 and 2016 estimates have not changed significantly from what I had before the 3/14 Technology Conference.  My margin has improved based on comments from TG regarding Hyperion and that it would carry “superior margins” to GT’s historic rates because no one else has a product like it in the marketplace.

Updated Revenue & EPS: 2015 $3.177 B – $2.84 EPS, 2016 $4.736 – $5.26 EPS

Previous Revenue & EPS: 2015 $3.177B – $2.74 EPS and 2016 $4.416B – $4.26 EPS.

Apple Upgrade Cycle Making News

 

Forbes: Is reporting that the “Mother lode” of Apple upgrade cycles is coming in 2014.  Citing ISI analyst Brian Marshall is predicting Apple will release 2 phones 4.7″ and a 5.5″ model.

 

We estimate the current iPhone installed base to be about 260mil users (roughly equivalent to the last 7 quarters worth of iPhone units). By our calculations, we estimate slightly over half of iPhone sales today go to upgrades (with the majority of new users coming from international markets). However, we believe that while the upgrade rate (i.e., % of installed base upgrading their device in a given quarter) had hovered in the 10-11% range over 2011-12, it has now dropped closer to 9% as users find few compelling reasons to upgrade. In peak quarters, the upgrade rate has reached the ~12-14% range and we expect a similar upgrade rate in 2H14 for iPhone 6, if not better. We believe this could drive ~$3.00 (or ~10-15%) EPS accretion over 2H14 assuming an incremental ~3% of the base upgrades each quarter.

GT’s Magical Merlin Technology

Mark Osborne (PV Tech): Covers GTAT’s Merlin Technology, the game changing addition to the solar market.

“We are very excited about the progress we are making in developing what we believe will be a true game-changing technology to lower the cost of solar modules,” said Tom Gutierrez, GT’s president and CEO. “Our Merlin technology uses mature, proven manufacturing processes to produce the flexible grids and we are confident that we can scale grid production to meet the requirements of the solar industry. Our Merlin technology is expected to fundamentally change the way modules will be manufactured, shipped and installed in the future.”

 

TG on CNBC with the Fast Money Team: Of course the first question was about Apple from the Fast Money team was about Apple.  TG went right into answering it by focusing on the creation of US jobs and the fact it is a sapphire manufacturing facility under a 1.4m square feet under roof.  TG indicated that GT has received 2 of 4 prepayments so far from Apple and things are going well.  When asked about it will be up and running to full capacity, TG stated, “As you can imagine in that industry surprise is a very important element in introducing products.”  TG also stated, that “the unique nature of what we are doing for Apple, we are the probably only ones in the world who can pull this off”.  He also said GT is not just about Apple, We introduced products (on Friday) that should drive 3-5b of incremental market opportunity over the next 3 to 5 years that are all equipment products”. 

 

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