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GT Advanced Retreats After Downgrade Citing Production Concerns

NEW YORK (TheStreet) -- Shares of GT Advanced (GTAT) are sinking after research firm CLSA warned that production from the company's new sapphire plant has been limited, putting the company's guidance at risk. GT Advanced makes sapphire products and solar energy equipment. 


WHAT'S NEW: After consulting with a sapphire expert, CLSA analyst Mark Heller reported that the yields of the company's new sapphire plant in Arizona appear to be poor. Consequently, the supply of sapphire that GT Advanced is producing for Apple (AAPL) appears to be limited and its profit margins may be hurt, Heller believes. The analyst sharply reduced his estimates for GT Advanced and warned that it may not meet its 2014 guidance. However, on a positive note, Heller expects GT Advanced's production issues to be eventually solved and he continues to expect Apple to utilize more sapphire covers over the next few years. The analyst kept an Outperform rating on the stock.

WHAT'S NOTABLE: On July 7, UBS downgraded GT Advanced to Neutral from Buy. The company's sapphire shipments from its Arizona plant in May were below UBS' expectations, the firm stated. Also downgrading GT Advanced on July 7 was research firm Canaccord, which cut its rating on the shares to Hold from Buy based on valuation.

PRICE ACTION: In late morning trading, GT Advanced fell 5.5% to $15.17.

Reporting by Larry Ramer.

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