Deutsche Bank lowers target price on IQE

Analyst at Deutsche Bank lowered their target price on semiconductor firm IQE from 60.0p to 40.0p on Wednesday, stating its second trading update this year pointed to an "awful" first half.

Deutsche Bank said IQE's first trading update in January pointed to a "reasonable performance" in the fourth quarter of 2022, with the potential for some destocking in the first half of 2023 led by the smartphone market.

However, the German bank said IQE's second update last week was "much more explicit and disappointing", reflecting higher visibility for the firm and their customers in March following Chinese New Year.

DB, which reiterated its 'buy' rating on the stock, highlighted that IQE now expects interim sales to be down by £30.0m year-on-year, equivalent to a 38% annual decline in USD terms.

"In light of the reduced loading of key facilities, adjusted EBITDA appears set to dip to breakeven," said DB. "IQE is pointing to the smartphone market as the key culprit with channel inventory of components and handsets into both the Android and Apple ecosystems."

"Both Wireless and Photonics are then similarly affected. A secondary impact is in the indium phosphide optics domain, where IQE supplies MA/COM and some Chinese players in the >25G backhaul arena addressing short- and long-range use cases."

Reporting by Iain Gilbert at Sharecast.com