Why Shares In IQE plc Plummeted Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.


Shares of Wafer_2_Zoll_bis_8_Zoll_2IQE (LSE: IQE) slid by more than 10% in early trade after the firm, which supplies semiconductor wafer products, announced a steep fall in revenue in the first half of the year. Revenues were impacted by a soft handset market and the strength of sterling. The board therefore expects first-half revenues of around £52m from £63m a year earlier.

So what:

IQE said it is still on track to achieve full-year expectations and the business remains “in good shape”. While revenue is down, profitability has improved through efficiency gains and economies of scale. Expected EBITDA is £11m, up 5% on 2013. Net debt (£36m) didn’t see an increase as a result of costs associated with reorganising  and restructuring of around £6.5m. The group invested £2m during the first half of the year to deliver synergies through a strategic inventory build.

Now what:

Looking further ahead, the chief executive Dr Drew Nelson said, “we have also made technical and commercial progress with our GaN development”. IQE, he added, is “well positioned to enjoy a transition to volume production in the next two to three years.” The share price is down 22% in the last twelve months, and I’ll leave it to you to decide if now is a buying opportunity.

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Mark Stones has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.