Canaccord ups price target on IQE

Canaccord Genuity has upped its price target on IQE, after the semiconductor specialist reported a surge in first-half revenues and forecast a return to profitability.

The bank was prompted to increase its price target to 70.0p from 60.0p, and reiterate its ‘speculative buy’ rating, after a recent trading update by IQE. The Aim-listed firm said on Friday that first-quarter revenues were ahead of internal expectations, while second-quarter trading had been strong, despite the Covid-19 pandemic.

It also forecast low single-digit adjust operating profits for the first-half.

In a note published on Monday, Canaccord upped its 2020 sales estimates from £139.4m to £157.5m, and increased forecasts for earnings before interest and tax for both 2020 and 2021.

Canaccord said: “The demand strength seen earlier this year has continued, helped by 3D sensing content gains in Apple’s iPhone 12, the ramp up of 5G and strength in the US military. As a consequence, IQE expects a blow-out first half.

“Short-term demand visibility remains limited, as the second leg of the Huawei ban and slower wafer restocking in wireless could impact momentum into the fourth quarter. However, we believe our raised estimates largely reflect these risks as they imply only flat revenues year-on-year in the second half.

“Our analysis suggests that last year’s share losses to Asian comps are reversing now, and earnings are finally lifting off the 2019 trough.”

The bank concluded: “With the strong first half performance driving the first upgrades in the last wo years, and reducing the group’s financial risk profile, we reiterate ‘speculative buy’ with a raised target of 70.”

As at 1430 BST, shares in IQE were ahead 13% at 55.10p.