Why GT Advanced Technology's Decline Is as Clear as Sapphire Glass

NEW YORK (TheStreet) -- If you thought the newest Apple (AAPL) phones were going to have sapphire glass screens made by GT Advanced Technology (GTAT) , you were wrong. 

Time to take profits and move on.

On Sept. 8, the day before Apple unveiled the newest versions of its iPhones, rumors started circulating the sapphire screen hadn't made the cut. That day GT Advanced shares started falling and they have since been down by as much as 35%. On Tuesday alone the shares fell to an intra-day low of $11.10 from $17.15. Shares currently trade around $11.60. 

Does this mean you should buy GT Advanced shares? Well, even with shares down this low, don't confuse low with cheap.

Despite the recent decline, shares have been up over 33% for the year to date thanks, in part, to those rumors. So if you're in the stock now, lock in profits and move on to the next great idea or risk losing 25% more.

Raymond James analyst Pavel Malchanov believes these shares are still too expensive. At 22 times forward earnings estimates of 54 cents per share, according to Yahoo! Finance, it's hard to argue against Malchanov's position.

Of all of the analysts who cover GT Advanced, the lowest analyst price target is $9, which represents roughly 25% decline from current levels. Hanging on to a stock on hopes that it will recover is one thing, but for a company that has yet to post positive earnings and recently posted year-over-year revenue decline of more than 60% that's not a risk worth taking.

Plenty of bets were made ahead of Apple's launch of the iPhone 6 and the 6 Plus. But Raymond James deserves credit. On Aug. 28, the investment firm downgraded the stock to underperform. Raymond James remains bearish. This time, bet on the analyst.

Apple does plan to use sapphire glass on its Apple Watch but GT Advanced, which has a supply agreement with Apple, has yet to disclose any financial details about it.

Malchanov doesn't think the Apple Watch sapphire-coated display is enough of a catalyst to propel the stock higher in 2015, which is when the watch will be made available to the public.

Accordingly, until there is more clarity on the pricing structure of the watch relative to the sapphire display size, these shares will continue to see more downside pressure. So for investors thinking the recent 35% decline presents a buying opportunity, you're likely to get cut by a falling knife.

At the time of publication, the author was long AAPL, although positions may change at any time.

Follow @Richard_WSPB

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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