Shares in Apple supplier IQE plunge as guidance disappoints and debt pile grows

Shares in semiconductor supplier IQE plummeted 14 per cent in early trading on Tuesday after it disappointed investors with weak guidance and as it racked up debt.

The Cardiff-based manufacturer of compound wafers used to make semiconductors said its full-year guidance lies at the lower end of consensus forecasts of revenue between £130m and 154m.

It also reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) of £11m to 17m, “as some markets remain in recovery” in the second half of 2024.

Adjusted operating loss narrowed from £17.5m to £7.2m in the six months to 30 June, 2024. Net debt plunged to negative £17m, down from funds of £5.3m in the same period last year.

In the first half of the year, revenue grew to £66m, up from £52m the year before. IQE posted an EBITDA of £6.6m, compared to a loss of £5.7m in the first half of 2023.

Apple’s iPhone 16 fails to generate market buzz

According to Panmure Liberum analysis, Apple is around 30 per cent of ultimate sales for IQE. But the latest Apple iPhone 16 launch on Monday failed to generate a market buzz and the US tech stock stayed flat, which may have been a further drag on IQE.

However, Peel Hunt analyst Damindu Jayaweera, said “the AI revolution is driving demand for compute. In the coming years, this is expected to shift to connectivity and power. In essence, into IQE’s sweet spot.”

Both Panmure Liberum and Peel Hunt hold a ‘buy’ position in IQE. The London-listed stock is up 23 per cent over the past year but down 12 per cent since the start of 2024.

Americo Lemos, chief executive, said: “IQE delivered a consistent performance in the first half of 2024, with a 27 per cent rise in revenue year-on-year and a return to a positive adjusted EBITDA position.

“We expect the market to continue to show pockets of recovery during the second half, resulting in more moderate growth for 2024 on a full-year basis. 

“We look forward to progressing the planned IPO of our Taiwanese subsidiary, which will help to accelerate our diversification strategy into the GaN Power market and microLED, and will provide additional significant cash resources for the Company.”