GT Advanced Technologies Sees Slowing Demand


The solar market is at something of a standstill until either competitors fall out of the industry or capital is injected to breathe new life into companies. As a result, GT Advanced Technologies is seeing results slowly decline even as its technology makes more productive solar panels possible.

In the fourth quarter, revenue fell 7% to $102.3 million, and the company reported a net loss of $159.4 million, including $164.7 million of writedowns in the quarter. On an adjusted basis the company lost $18.1 million, or $0.15 per share. Next year looks iffy as well. Backlog dropped $300 million in the last quarter to $1.2 billion as adjustments were made for cancellations and only $7 million in new orders came in.

One of the biggest challenges is oversupply in the solar industry. LDK Solar and ReneSola were two of the biggest equipment buyers a few years ago, building capacity that led to falling costs in the industry. But both companies have liquidity issues and can't afford to buy equipment, even when the next generation comes out.

The HiCz product coming out later this year is supposed to allow manufacturers to jump to the next level of efficiency. But traditional buyers like LDK and ReneSola don't have the balance sheets to buy equipment now. As a result, management doesn't expect the product to contribute significantly to revenue this year.

On the sapphire side of the business, we're going to have to wait until the second half of 2013 to see growth. GTAT expects revenue to be backloaded to the second half of the year. The company has high hopes for new sapphire products, but it's dealing with low prices and customers who aren't in position to buy equipment right now.

Foolish bottom line
I like where GTAT's technology is headed but demand is up in the air right now. The company went from $303 million in cash a year ago to net cash of $121 million right now, and it only expects to earn $0.25-$0.45 per share next year. If orders pick up the stock could move big, but right now a cautious approach is wise when looking at this stock.

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