UPDATE: Piper Jaffray Upgrades GT Advanced Technologies on Supply Agreement with Apple

In a report published Tuesday, Piper Jaffray analyst Jagadish Iyer upgraded the rating on

from Neutral to Overweight, and raised the price target from $5.00 to $12.00. In the report, Piper Jaffray noted, “We are upgrading GTAT to OW and increasing our PT to $12 (20x CY15 EPS of $0.60), post their earnings, as the company entered into a multi-year supply agreement to provide sapphire substrates to Apple. Despite lowering their CY13 revenue guidance by 45% to $290-$320m ($500-$600m previously) and incurring earnings losses this year ($0.40-$0.50), we believe the longer term Apple supply agreement provides visibility into 2016 with revenues exceeding $1bn by 2015 and potentially doubling from '14 to $1.4bn in 2016. While Apple provides a $578m pre-payment, paid back over a 5-year period, we see overall gross margins hovering around 25%-30% likely driving positive cash flow and earnings. GTAT rolled out CY14 revenue guidance of $600-$800m with 80% of it coming from Sapphire while GM of 25-30% drives improving earnings next year.” GT Advanced Technologies closed on Monday at $8.38.