The semiconductor wafer manufacturer has had a rough time over the last five years, with around 90% of its market-cap wiped out. But since 2026 kicked off, the penny share has already surged by almost 55%, leaving index investors in the dust.

That means anyone who put £20,000 to work at the start of the year is already sitting on £11,000 of profit.

So what’s going on? And should investors rush to buy shares while they’re still below 10p?

From downturn to recovery

IQE shares underperformance since 2021 has been driven by a variety of complex factors. The introduction of 5G infrastructure was supposed to be a massive tailwind for this business, particularly for its gallium nitride wafers that are used in base station amplifies and radio frequency modules needed to access the 5G network.

However, due to supply chain disruptions, the rollout of 5G technology proved to be far slower than anticipated. And consequently, IQE’s sales stagnated while losses widened.

As such, the balance sheet began accumulating more debt, and management also issued new shares to raise capital and shore up the balance sheet. And with guidance missed, financial health tested, and shareholders diluted, it isn’t a major surprise to see the stock plummet.

But skip ahead to 12 January, and the penny stock erupted by over 40% in one day!

Thanks to a perfect influx of higher defence, AI, 5G, and hyperscaler spending, demand for IQE’s wafers is surging. Revenue guidance for its 2025 fiscal year was updated to £97m – towards the higher end of its previous £90m-£100m outlook. But more dramatically, the underlying earnings outlook has been significantly upgraded.

Previously, management expected to deliver anywhere between a £5m loss and a £2m gain. Now, it expects a profit of at least £2m.

Combining that with an improved cash position of £15.6m and a strong order book for the first quarter of 2026, the operational challenges that have plagued this business for years look like they’re getting resolved.

With that in mind, it’s no surprise to see sentiment begin to shift drastically.

Time to buy?

IQE’s new-found revenue and earnings momentum are dependent on the AI and defence spending supercycle that’s recently emerged. So long as the geopolitical landscape remains tense and AI spending remains robust, 2026 could see even more explosive share price growth emerge before the end of the year.

However, that also means if AI spending drops due to lacklustre returns, or defence spending reverses as tensions ease, demand for IQE’s wafers could once again tumble.

It’s also important to highlight that the balance sheet is still a bit fragile. And if unforeseen costs push underlying earnings back into the red, shareholders could find themselves diluted again.

Overall, this penny stock presents a distressed turnaround opportunity for growth investors with a high-risk tolerance. It’s not a share I’m personally tempted by right now, but definitely a business worth investigating further.

The post Down 90%, is this penny stock on track for an explosive recovery in 2026? appeared first on The Motley Fool UK.

Supply chain issues

AstraZeneca (LSE:AZN) is one of the most prominent global players in the pharmaceutical space. The stock is down 14% in the last month and down 7% in the past year. The short-term move already reflects some concern from investors about the impact of the new US trade policies.

In short, the US is AstraZeneca’s largest market. The company manufactures and exports a range of drugs to the US, including treatments for cancer and respiratory diseases. Therefore, President Trump’s proposed tariffs on pharmaceutical imports could directly affect revenue.

Historically, drugs have been exempt from global tariffs due to their life-saving nature. Yet this doesn’t appear to apply right now, with chatter over the past week indicating that import levies are definitely going to happen for this sector.

The company does indeed have US manufacturing facilities, such as in Maryland and Delaware. It could respond by expanding domestic production to limit import charges. Further, it could look to absorb the tariff costs, meaning that consumer demand stays high. However, I think it’s going to be a tough year ahead for the company to navigate the supply chain workarounds.

Penny stock woes

A second company in the spotlight is IQE (LSE:IQE). The penny stock has a market cap of £92m and has lost 66% of value in the past year. IQE is a leading supplier of semiconductor components used in various electronic devices.

The company has significant operations and customer bases in the US, including partnerships with major tech firms. For example, it supplies products directly to companies, which then add components and sell to Apple. So, the impact that Apple is feeling right now, with tariff headaches with China, could filter down to lower demand for IQE.

Aside from this, the tariffs will impact the company more directly from its exports to the US. It’s not a large business, so I struggle to see it being able to invest in making a new production facility in America (it currently is based in Cardiff).

On the other hand, the share price could rally in the future as the products are in demand for various AI projects. This is the future, so some significant contract wins could cause investors to get excited. However, right now I think the import levy concerns are front of mind for many.

Overall, I’m staying away from both companies given the current headline news and feel there are better investing options elsehwere.

The post 2 UK shares that could be significantly impacted by the new tariff rumours appeared first on The Motley Fool UK.

1. Walk, don’t run

Compounding’s a marvellous tool for building wealth. But this snowballing effect can take a considerably long time to get going, hence why starting an investing journey early on in life can be so advantageous. However, that doesn’t mean investors should rush into making decisions.

Analysing businesses takes time. Beyond understanding how it makes money and the risks it faces, a detailed investigation into long-term opportunities, competition, and financial statements is critical. As is estimating a fair price to pay.

This process can be quite tedious, especially when shares of a particular ‘hot stock’ are flying through the roof and everyone else is seemingly making a fortune. However, getting drawn into the hype without proper due diligence is usually an excellent way to lose money in the stock market.

2. Stick to a circle of competence

Buffett’s portfolio contains a diverse collection of companies. Yet for decades, there was a distinct lack of exposure to the technology sector. Considering it has been proven to be one of the most lucrative industries since 2010, he has left a lot of money on the table.

But at the same time, he’s avoided falling into plenty of traps simply by not investing in businesses and sectors he doesn’t understand. This is where I made some of my biggest blunders at the start of my investing journey a decade ago, including Superdry (now delisted), ValiRx, and IQE (LSE:IQE). Let’s zoom in on the latter.

IQE’s a supplier of compound wafers for manufacturing semiconductor chips. They’re predominantly used for wireless technologies like 5G and smartphones.

With consumer electronic demand down significantly due to inflation, the group’s been struggling of late. This impact was only amplified by inventory destocking across the sector. But market conditions are starting to improve. And with cost-cutting efforts by management set to hopefully boost margins, a turnaround might be underway.

However, at the time of my initial investment, my knowledge of the semiconductor industry was patchy at best. Consequently, I ended up overpaying considerably, which translated into a massive loss when I sold in 2020.

3. Invest for the long run

When investing in a business, barring some rare exceptions, Buffett’s committed to holding his position indefinitely. And in some cases, that’s expanded to decades. He’s held shares in Coca-Cola for 36 years and American Express for 31 years. And even some of his more recent sales only came after decades, such as Wells Fargo and Costco Wholesale.

This cuts to the core of his investing philosophy. He wants to build wealth by owning wonderful companies and ride the coattails of their long-term success. And while my portfolio’s tiny compared to his, it’s a strategy that’s already drastically improved my performance over the years.

The post No savings after inflation? I’d use the Warren Buffett method to build wealth appeared first on The Motley Fool UK.

Yes, you read that correctly. 1,786%, to be exact (at the time of writing). To add some perspective to the figures, you would have had to invest in the S&P 500 at the beginning of 1989 to have the same return on investment.

The majority of companies that produce semiconductors, which is a key component to power artificial intelligence technology, are listed in the US. But I thought I would take a look at some of the UK listed companies and see if there is a more local opportunity.

Alphawave Semi

Alphawave Semi (LSE: AWE) is a global leader in high-speed connectivity for the world’s technology infrastructure. The company serves the global market, with customers in North America, Asia Pacific, Europe, and the UK.

Although 2023 revenue came in below estimates, the company is forecasted to continue growing revenue in the coming years.

The EV to EBITDA is 53.4, which is much higher than the FTSE Russell’s relative sector average of 6.2. That means there is a much higher premium to be paid for this stock, but the figure is not far off the likes of Nvidia and Advanced Micro Devices.

The share price has held above £1 in the last year and currently sits just above that level at £1.16. The company hit a two-year high of £1.93 in March of this year.

IQE

IQE (LSE: IQE) manufactures advanced epitaxial wafers — essentially semiconductor material — for a wide range of technology applications in wireless, optoelectronic, electronic, and solar devices.

The share price closed April up 37%, mainly due to its earnings announcement. Recent performance has not been strong with 2023 revenue falling, but a brighter outlook on future revenues helped investors to buy back into this name.

The EV to EBITDA is 11.4, which is more in line with its peers than Alphawave Semi.

A total of eight investors have a majority stake in the company with 51% ownership. Institutions’ substantial holdings in IQE imply that they have significant influence over the company’s share price.

Risks to both

Both companies are in the same sector, so they pose similar risks. Semiconductor valuations have been lofty. Any slowdown in this industry’s growth would cause investors to rethink their optimism.

A specific risk to Alphawave Semi is its transition away from Chinese customers. The firm is redirecting its focus towards other regions. This creates some risk towards revenue and the company successfully offsetting this loss elsewhere.

IQE has posted annual earnings per share (EPS) losses for the last five years. Although the sector is growing, investors will want to see bottom-line figures increase in the coming years. Any semi-annual earnings that set back these expectations will negatively impact what markets are pricing in.

Overall

I think there is some potential in these London-listed semiconductor names. With the rapid expansion and demand for chips, it is likely an area of the market that will outperform in the UK.

But I have to ask myself, “Are there better opportunities elsewhere?” Given the inherent volatility of investing in tech, I think I will keep my attention on the US frontrunners for now.

The post With Nvidia leading the way in the AI space, these UK stocks have my interest appeared first on The Motley Fool UK.

They can be found in everyday consumer products, including smartphones, laptops, televisions, and washing machines. They also have applications in many other areas, such as information technology, artificial intelligence, communications infrastructure, medical equipment, transportation networks and military systems. In fact, it’s no exaggeration to say that semiconductors are integral to the entire global economy.

According to the Semiconductor Industry Association, a record 1.3 trillion units were shipped in 2025 with sales surpassing $600bn for the first time. But with AI infrastructure spending still marching upward, analysts’ forecasts are projecting even more growth before the end of the decade.

This could make UK semiconductor stocks an attractive proposition. But what are the best chip companies to invest in, and is this market sector right for you? 

What are semiconductor stocks?

Semiconductor stocks are companies that design and manufacture computer chips, whose shares can be bought and sold on a public stock market. 

The industry is sometimes divided into two sub-sectors:

• Semiconductors
• Semiconductor Equipment & Materials

Companies in the former category are producers of semiconductor chips. Companies in the latter category supply tools, parts, and equipment to the semiconductor industry.

Top semiconductor stocks in the UK

Here are the leading UK semiconductor shares traded on the London Stock Exchange in order of market cap as of January 2026: 

Oxford Instruments

Oxford Instruments is a long-established and profitable technology company. It’s also currently among the largest UK semiconductor stocks.

The company serves a range of different markets, including materials analysis as well as healthcare & life sciences. But in recent years, semiconductors have become an increasingly larger core part of operations, generating 29% of revenue in 2025 – it’s the second largest segment.

Management has signalled its confidence in further growth in demand by building a new state-of-the-art facility in Bristol to house its compound semiconductor systems business. Capabilities include fault-finding and failure analysis within advanced micro devices for the leading semiconductor manufacturers, and cleanliness control in precision manufacturing.

IQE

IQE describes itself as “the leading global supplier of advanced compound semiconductor wafers”. These wafers have a diverse range of applications across handset devices, telecoms infrastructure, and 3D sensing.

In recent years, the company has struggled to maintain growth, with earnings consistently providing elusive growth, a struggle that continued throughout 2025.

However, entering 2026, thanks to the tailwinds of AI spending, the group’s order book does show signs of strength, offering improved demand visibility.

CML Microsystems

CML Microsystems occupies a profitable niche in the development of mixed-signal, radio frequency, and microwave semiconductors for global communications markets. It targets sub-segments with strong growth profiles and high barriers to entry.

CML believes its diverse, blue-chip customer base and broad product range largely protect it from the cyclicality usually associated with the semiconductor industry.

Nanoco Group

Nanoco is another young UK semiconductor company that’s still loss-making – albeit by a small margin.

Its niche focus on quantum dots and nanomaterials limits the group’s current market penetration opportunities. However, with new technological innovations accelerating, demand for its specialised products is slowly starting to ramp up. And in the meantime, the business has continued to deliver resilient revenues reaching £7.6m in its 2025 fiscal year.

Nevertheless, management continues to describe its business as “a world leader in the development, manufacture and supply of quantum dots and other semiconductor nanomaterials”.

Investing in foreign semiconductor markets

UK semiconductor stocks are relatively small when viewed on the world stage. As such, investors seeking to buy shares in industry giants will have to look to overseas stock markets.

Leviathan Taiwan Semiconductor Manufacturing Co and Dutch colossus ASML can both be traded in the US market. And of course, the US has homegrown powerhouses.

• Nvidia Corporation – $4.45trn market cap
• Broadcom Inc – $1.61trn market cap
• Intel Corporation – $232.4bn market cap
• Qualcomm Inc – $175.9bn market cap

A further option for UK investors is to buy shares of the London-listed exchange-traded fund VanEck Semiconductor ETF. The fund holds 25 of the world’s top chip stocks (including the six just mentioned), and is a one-stop shop for broad exposure to the industry.

Are semiconductor stocks right for you?

Investors considering buying a semiconductor stock need to take a number of things into account. First, it’s important to be aware that the industry is highly cyclical. It’s notorious for periodic supply-and-demand imbalances, leading to spells of feast and famine. Investors need to be prepared to accept some large swings in the share prices of semiconductor stocks.

Another thing to be aware of is that the industry is very much driven by the maxim of ‘smaller, faster, cheaper’. There’s constant pressure on chip companies to come up with ever more advanced technology at lower prices. It can be as short as a few months before one state-of-the-art product is overtaken by another.

To successfully compete for market share, semiconductor companies need to sustain a breakneck pace of innovation. As such, it’s necessary to recycle a high percentage of revenue back into research and development (R&D).

The best chip companies to invest in

While global semiconductor sales growth is a given, translating it into profitable growth is less certain. Therefore, picking the best chip companies to invest in can be tricky.

High gross margins, operating margins, and free cash flow generation, relative to sector peers, can indicate a company that’s operationally efficient and adept at identifying good areas to target R&D. These qualities, together with a strong balance sheet, may better equip a firm to navigate the hazards of the semiconductor cycle.

If you’re prepared to accept some large ups and downs in share prices and to put a bit of work into finding the stronger businesses in the industry, tapping into the structural growth of this market sector may be right for you.

The post Investing in Semiconductors: Top UK Semiconductor Stocks of 2026 appeared first on The Motley Fool UK.

But I’m always on the lookout for price drops, which I believe can often give us fresh buying opportunities. And they can be especially attractive if we can see a good reason why the price might start climbing again.

Technology growth

Shares in semiconductor materials specialist IQE (LSE: IQE) have fallen nearly 75% over the past five years. But that was largely due to a massive spike in 2017 that saw the shares rise to an unsustainable valuation.

The IQE share price has regained a little since its 2022 lows back in May. And I can’t help wondering if first-half results, due on 6 September, might provide the spark to set the fire going again.

The company describes itself as “the leading supplier of compound semiconductor wafer products and advanced material solutions to the global semiconductor industry“.

We’ve been suffering from a global chip shortage. And that means IQE should be well positioned as the industry ramps up again to support worldwide demand, right? Well, I hope so.

The big risk is that IQE is not currently profitable. But forecasts suggest that should change by 2024.

Back in fashion?

I’m hoping that interim results from boohoo.com (LSE: BOO) might give shareholders a bit of respite. They’re due on 28 September, so we have some weeks to wait yet. The boohoo share price, meanwhile, has crashed by 80% over the past 12 months.

Partly that’s down to shifting post-pandemic shopping habits. But the company has had a number of well-publicised problems of its own.

UK sales figures for the first quarter were flat, though US sales dropped by 28%. There’s a big hit from global infrastructure issues there. And it represents the loss of some early inroads into the American market that might be hard to regain.

The company expects adjusted EBITDA to be only just positive, and the City predicts a reported loss this year. So there’s financial risk, clearly. But forecasts suggest profit in 2023/24, with a P/E dropping as low as 11.5 by 2024/25.

Technology trust

My final pick is one that’s already started to climb back from 2022 falls. I’m talking about Scottish Mortgage Investment Trust (LSE: SMT), whose shares hit a low in June.

The trust invests in global technology stocks, and has Moderna, Tesla. and ASML among its biggest holdings.

When the US Nasdaq index crashed into a bear market in 2022, Scottish Mortgage shares went with it. Over the past couple of weeks, despite a recent recovery, they’ve followed the technology index back down again following its latest dip.

There are no updates due in September, so nothing there that might give the shares a boost. But if Nasdaq sentiment does improve further, might we see a bull run for the investment trust?

Risks

I’m speculating, and there’s plenty of risk with all three stocks here — especially, I think, the two earmarked for losses this year.

But for the long term, I rate all three as good value.

The post 3 growth shares that could skyrocket in September appeared first on The Motley Fool UK.

• 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.

The post How did UK tech stocks perform in February? appeared first on The Motley Fool UK.

IQE is a UK-based firm, designing and manufacturing vital semiconductor parts. Semiconductors are core components in many hot new technologies at the moment. Some of these include the rollout of 5G, as they are used in 5G masts. Hybrid automobiles also require semiconductors. The rise in hybrid vehicles as many vehicle manufacturers are moving away from petrol and diesel vehicles means demand is set to explode in the coming years.

Penny stocks are those that trade for less than £1. As I write, IQE shares are trading for 42p. At this time last year, the shares were trading for 80p, which is a 47% loss over a 12-month period.

There has been a well documented shortage of semiconductors recently. I believe this is one of the reasons the IQE share price has tumbled. 

Penny stocks have risks

The global semiconductor market is unique in the sense that there is no one major player and it seems to be scattered throughout the world. Reviewing other semiconductor manufacturers, it seems IQE has lower profit margins, of just 17%, compared to others in the market. The market average is 25%. One competitor, Taiwan Semiconductor Manufacturing Co., has a 40% margin. This could hurt future growth for IQE.

The recent rise in inflation and costs has led to a spike in raw material costs. These surging costs mean IQE’s profit margins could take a hit too. The global supply chain crisis is affecting the shortage of semiconductors as well as the parts needed to manufacture them. This will also affect performance and progress.

A penny stock I’d buy

Many penny stocks do not have enough information or track record to review in regards to determining investment viability. IQE does and I can see it has a good track record of performance. Looking back, I can see revenue and gross profit have increased year on year for the past two years.

Coming up to date, IQE released a post-close trading update at the end of last month. It said revenue was expected to be in line with guidance, and close to £164m. This is less than 2020 levels but still strong performance based on market headwinds. Full results are due at the end of March.

The surging demand for semiconductors, which is currently outstripping supply, is one of the main reasons I am bullish on IQE shares. There are many applications of semiconductors, aside from the 5G rollout and hybrid vehicles, such as in TVs, smartphones, and gaming devices. As the adoption of technology continues, accelerated by the pandemic, I think IQE’s performance will continue to grow too.

Overall I’d happily add IQE shares to my holdings. I think the shares are currently very cheap and there seems to be enough demand that could last a very long time to boost IQE’s performance and balance sheet. I believe it is a excellent penny stock with long-term potential and returns ahead.

The post 1 beaten down penny stock I’m backing to explode in the future! appeared first on The Motley Fool UK.

There’s an old saying: “When the facts change, I change my mind. What do you do, sir?” Here, I’ll discuss the changes at IQE and explain why I’ve promoted the stock to my watchlist.

Short-sellers attack IQE shares

In 2017, the IQE share price reached as high as 178.75p on 16 November. This gave the company a market capitalisation of £1.35bn. However, short positions (hedge funds betting on the share price falling) increased sharply through the second half of the year. By 23 January, more than 10 funds were shorting 12.4% of IQE’s shares.

In early February, two short-sellers — ShadowFall and Muddy Waters — published research reports claiming IQE was, in the words of Muddy Waters, “an egregious accounting manipulator.” IQE issued rebuttals.

The shares rallied but have never got back to that 178.75p level. Their 2021 high, made on 21 January, was 88.3p, and they’re currently trading at 47.5p. I can now buy 46% cheaper than in January and at a 73% discount to the November 2017 price.

Short-selling and boardroom changes

A few things have changed since the short attack. Only one fund now holds a disclosable short position in IQE shares (Ennismore at 0.91%). IQE has a different chief financial officer, his predecessor having died in tragic circumstances shortly after the ShadowFall and Muddy Waters reports. Finally, IQE’s founder and chief executive officer Dr Drew Nelson is set to handover to a new CEO.

The significantly reduced interest of short-sellers and the executive changes allay some of my past concerns about IQE’s accounting and management.

IQE shares are on my watchlist

Another of my previous concerns was that after two decades as “the global leader in the design and manufacture of advanced semiconductor wafer products,” IQE had generated little in the way of free cash flow (FCF). As I noted in an article in 2019: “Periods of elevated investment and heavily negative FCF have been followed by little meaningful FCF advance in subsequent years.”

At the time of that article, IQE was in a period of heavy investment. Capital expenditure and capitalised research and development totalled £41.8m in 2019 and FCF was negative to the tune of £25.4m.

However, this period of investment does appear to have led to a meaningful FCF advance. In 2020, on lower capital expenditure and capitalised research and development of £10.4m, IQE delivered positive FCF of £22.7m.

It may be the company has now reached a level where economies of scale are beginning to kick in. And with “record revenue of £178m underpinned by the start of the 5G mega-cycle,” the future could be very bright.

I’m not quite confident enough to buy IQE shares just yet. I’m expecting capital expenditure and capitalised R&D in 2021 to be in the region of £30m–£35m. And FCF to be insipid at best. I want to see a bit more evidence that IQE can deliver consistently higher FCF. But I’ve put the stock on my watchlist.

The post Here’s why I’ve put IQE shares on my watchlist appeared first on The Motley Fool UK.

Semiconductor shortage and share price fluctuations

IQE designs and manufactures compound semiconductor materials. These semiconductors are vital components in many burgeoning technologies right now such as hybrid vehicles as well as 5G masts.

There is a well documented shortage of these semiconductors, however. I recently wrote about this affecting hybrid vehicle manufacturer NIO and other manufacturers too. IQE is one of a number of players in the semiconductor industry scattered throughout the world. This is an issue as the pandemic means different parts of the world are experiencing economic recovery at varying rates. For example, China is recovering a lot faster than the US and UK. Production levels will vary based on location and economic recovery.

The IQE share price has dropped 35% in value so far in 2021. At the beginning of January 2021, I could pick up shares for 74p per share. As I write, shares are trading for 47p. This price drop is one thing that has attracted me to what I consider an excellent penny stock.

After a market crash low price of 22p per share, the remainder of 2020 was a good one for the IQE share price. It rose to 74p before the calendar year ended. I believe this drop off can be attributed to market-wide production issues linked to the pandemic.

Results and penny stocks risks

IQE announced full-year 2020 results in March. Revenue increased by 27% to £178m. In addition, EBITDA rose from £16.2m to £30.1m. I was encouraged by these results.

Despite IQE reporting a rise in sales and operating losses decreasing in the 2020 results, profit margins can be described as underwhelming compared to some competitors and market wide. For example, competitor Taiwan Semiconductor Manufacturing Co has underlying profit margins of close to 40%. The market average EBITDA is 25%. IQE’s sits at close to 17%.

I have three primary concerns with IQE just now. First, I find competitors in the market seem to be doing better than IQE, as I mentioned earlier. Next, the 5G rollout has slowed due to the pandemic. I expect this to continue, but it may not be a priority due to the ongoing pandemic and it seems there could be further restrictions and variants worldwide. This would affect IQE. Finally, IQE could be hindered further by production issues linked to the pandemic and recovery. This would no doubt affect its balance sheet.

My verdict

The reason I am most impressed by IQE and consider it one of the better penny stocks opportunities for my portfolio is its growth achieved to date and potential in the future. I am referring to recent growth in its top line and its product’s place in the global rollout of technology via multiple channels.

Drivers are being encouraged to drive electric vehicles and the 5G rollout is a must for the telecoms and tech industry. I believe IQE is well positioned to benefit from this demand for semiconductors despite production issues. At its current price point, I consider it one of the cheaper penny stocks I would buy for July.

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