H731400 : Naja
Apple Might Not Use Sapphire, Short GT Advanced Technologies
Jul 07 2014, 11:30 | by Akshansh Gandhi | about: gtat | includes: aapl
Due to the high cost of producing sapphire, Apple may not use it in the iPhone 6.
Recent reports indicate that Apple may not have enough sapphire to use in both the versions of the iPhone 6.
GT Advanced Technologies has a high short of interest and will struggle to justify its valuation.
GT Advanced Technologies is a good short candidate.
GT Advanced Technologies' (NASDAQ:GTAT) performance in the last twelve months has been astronomic to say the least. GT's shares are up 257% in the past six months, as Apple (NASDAQ:AAPL) announced that it is advancing $578 million to GT to employ over 700 people at Apple's Arizona facility to manufacture sapphire. This big deal with Apple is the reason behind its robust rise in the stock price, which puts a curtain on various negative aspects that could adversely affect GT.
However, Apple hasn't confirmed it will be using GT Advanced Technologies' sapphire in the iPhone 6, and there are many factors that point toward the fact it may not happen.
Is GT overhyped?
First, with the smartphone market saturating, Apple will be looking to maximize its profit on the iPhone 6, and given that sapphire displays are expensive, Apple may decide to stick to Corning's (NYSE:GLW) Gorilla Glass.
As of now, the estimated price of sapphire display for an iPhone-sized phone lies in the $9-$12 range. In comparison, Gorilla Glass will cost Apple less than $3 for the same. Given the massive difference in the manufacturing cost, Apple may decide to not use sapphire in the iPhone 6.