IQE share price: where now after it slashes revenue forecast amid trade turmoil?

The British semiconductor company has seen its shares tumble more than 25% since Monday, after it warned investors that it will record an operating loss this year following a downgrade of its revenue guidance.

IQE has seen its shares plummet more than 25% since Monday, after the British technology company warned investors that it would record an operating loss this year due to it slashing its revenue forecast for the second time in five months.

The downgrade of its revenue guidance is the result of ongoing US-China trade tensions, which have hindered its sales to customers like Apple in the US and Asian customers in Taiwan and Singapore who purchase its semiconductor wafers for chips used in their products.

‘IQE has experienced very challenging market conditions in 2019,’ IQE CEO Drew Nelson said. ‘Shortfalls in revenue relate predominantly to two major customers, with whom IQE is confident it has not lost share and who remain very well positioned for returns to growth in 2020.’

US restrictions on Huawei hit IQE sales

Earlier this year, the Cardiff-based company warned investors that it would fall short of full-year revenue forecasts as a result of the industry’s supply chain being significantly impacted by US restrictions on China’s Huawei.

As such, IQE downgraded its full-year revenue guidance to between £136 million to £142 million, down from its previous forecast of between £140 million to £160 million. The company recorded revenues of £156.3 million last year.

A mid-single digit adjusted operating loss is now expected resulting from revenues being slightly below the previous guidance range. IQE recorded a £16 million profit in 2018.

However, the company’s CEO said that it ‘remains well positioned to capitalise on an expanding future compound semiconductor market opportunity driven by the macro trends of 5G and connected devices’.

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Analysts downgrade price targets, but believe IQE shares will rebound

Analysts from Barclays Capital and Peel Hunt downgraded their target price for the stock to 73p and 95p respectively in November.

However, based on IQE trading at 48p as of 11:50 GMT on Wednesday, both banks still believe that the stock has a potential upside of between 52% and 97%.

You can go long or short IQE with IG using derivatives like CFDs.

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