GT Advanced Technologies (GTAT) — Is it right to buy this now? Nope. (September 17, 2014)
I want to look at GTAT here, GT Advanced Technologies ( NASDAQ:GTAT ). This is the company that makes the sapphire glass that everybody was hoping was going to be in the new iPhone. As it turns out it’s in the iWatch, but that’s not until “iNext” year. So that’s an “i” problem here for GT Advanced Technologies ( NASDAQ:GTAT ).
Now why am I covering this stock? Since the announcement the stock is down 32 percent, that’s kind of a big dump. But here’s the thing, the company is losing money and the way the market assigns multiples to these companies, the companies that are losing money, is that they really look out in the future and say, “Okay, they may be losing money now, but what do I think they’re going to do next year, two years from now?” Then money managers determine whether the stock is really super expensive, again, because they’re losing money.
Well because these guys aren’t having their glass in the iPhone 6, that’s a problem, not just for current earnings, but going forward. Are they just going to decide to start putting them in next year? Not likely. So there’s a whole re-valuation going on with GTAT ( NASDAQ:GTAT ) here. If you look at the weekly chart, this stock still has a lot further that it can fall. I’d say support was right around 12.75 or so, well that’s been blown through on the weekly chart. Could this stock get down to $8.00? Sure it could, it was there just late last year in a really nice uptrend, that could be a complete trend reversal.
Do I think it will get there? Yes, I actually do, I think it will get to 8.00, at least to $10.00. You go ahead and do the math and see what percentage you think this thing could fall. But the question you want to ask yourself is, “Self, would I want to buy this stock right now? Is there any reason, right here at 11.63, that if I’m looking for deals I’m going to buy this stock?” I would say no. I’d say once it gets down to 9.00 or maybe $8.00 you’re going to have slid this chart over a lot more and you’re going to have more time here, but I think that’s when you want to consider buying this stock.
For now, if you like to short stocks, it’s a little bit tough to be shorting it here, because just by virtue of the “rubber band” effect, where the rubber band is stretched so much, so quickly, that you’re probably going to get shorts covering, which will push the stock up a bit. I wouldn’t really want to be shorting it right now, but if the stock can rebound for a day or two, then I would absolutely want to short that stock, because I think the short’s going to work. You just want to get it on a little bit of a rebound as opposed to just piling in. But ultimately, however you do it, this stock is going to trade lower for the pure and simple reason that it isn’t going to trade higher, unless it’s on a little bit of short covering at which point shorts will be reloading.
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