How did UK tech stocks perform in February?

A number of UK tech stocks saw big share price movements in February. Roland Head gives his view on some of the winners and losers.

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Key points

  • Top UK tech stock movers included semiconductor and cyber security specialists
  • One recent IPO was forced to cut its profit guidance
  • A popular consumer brand looks expensive to me

UK tech stocks didn’t escape February’s market sell-off. But there were some big winners too.

February’s top UK tech risers

The share price of semiconductor materials specialist IQE rose by more than 30% in February, making it the top UK tech stock riser with a market cap over £50m. February’s gains continued a rally that started in January, when IQE said its 2021 results should be in line with November’s reduced forecasts.

I’m reassured that IQE hasn’t issued another profit warning. But IQE’s share price is still down by 45% compared to one year ago. However, new chief executive Americo Lemos has now started work and seems determined to return the business to growth. IQE has performed well in the past. I think it might be worth me watching.

Other top tech risers in February included recent IPO Microlise. This transport management software specialist released a solid trading update at the end of January, confirming that the group’s 2021 results should be in line with expectations. I think this could be an interesting business. But the shares look too expensive for me on 45 times forecast earnings.

One other winner that caught my eye was cyber security specialist Darktrace, which gained around 10% in February. Darktrace didn’t release any financial results during the month but did report a new “million-dollar deal” with “a multinational electronics corporation”.

Darktrace also went on the acquisition trail last month. It paid €47.5m for Dutch firm Cybersprint, which is an “attack surface management company”. I reckon Darktrace remains interesting for me to watch, but hard to value.

UK tech stocks that fell in February

The biggest faller in the UK tech sector last month was recent IPO Made Tech, which provides technology services to the public sector. Unfortunately, the shares fell by 55% last month, despite the company reporting a 131% rise in half-year revenue. 

The problem was that these results came with a warning that full-year profits will be lower than expected. Management said this is due to staff recruitment costs rising sharply. As a result, broker earnings forecasts for the current year have been cut by around 25%. I wonder if this business is trying to expand too fast. One for me to watch, perhaps.

Some of the other big fallers in February in the tech sector included consumer review website Trustpilot and LED lighting specialist Luceco. Both were down by around 20% at the end of the month, although neither company issued results during the period.

Luceco warned of tougher market conditions in 2022, but the shares look decent value to me at current levels.

I’m not so sure about Trustpilot. This online business is still loss-making and looks expensive to me. Its market cap of £616m is nearly five times 2021 forecast sales. Admittedly, sales growth has been strong. Trustpilot could grow into its valuation over the next couple of years. But the risk/reward balance doesn’t look attractive to me at current levels.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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