Deutsche Bank lowers target price on IQE

Analysts at Deutsche Bank lowered their target price on semiconductor manufacturer IQE from 60.0p to 50.0p on Friday following the group's "disappointing" fourth-quarter trading update.

Deutsche Bank stated IQE's update on Thursday contained some disappointing guidance as far as near-term trading was concerned, with the company's full-year sales expectations taking "a big hit" in the fourth quarter, reducing to £152.0m from £166.0m.

While the German bank acknowledged that foreign exchange headwinds and China 5G were again flagged as issues, the main incremental weakness since September came from the smartphone market, where IQE had seen softness late in the year in both smartphone PAs and in VCSEL from Skyworks and Lumentum - major suppliers to Apple.

"The immediate thought that comes to mind given that Apple is constrained presently with reasonable sell-through is that this is a function of customer over-build in prior quarters and ongoing supply constraints elsewhere," said DB, which did reiterate its 'buy' rating on the stock.

Notably, DB pointed out that IQE seems to believe that share shifts or content were not to blame for its Q4 performance, but that there was "softening demand throughout the smartphone supply chain".