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Canaccord Genuity stays at 'speculative buy' on IQE

By Alexander Bueso

Date: Tuesday 18 Feb 2020

Canaccord Genuity stays at 'speculative buy' on IQE

(Sharecast News) - Analysts at Canaccord Genuity stood by their 'speculative buy' recommendation and 65.0p target price for shares of Apple supplier IQE despite the former's warning overnight on its first quarter revenues.
Coming as it did on the heels of three major downgrade cycles in late 2018 due to weak demand for iPhones and the ban on Huawei, "this third instance of a negative external factor may yet again test investors' patience," they said.

The length and depth of the hit to the company remained in question, but for now they estimated that IQE's sales would take a mid-single digit percentage point hit to to revenues and that its adjusted earnings before interest and taxes would be impacted by 5.0-20.0%.

There was a silver lining however, because the bulk of the impact came from the supply side and not demand, as in late 2018.

"Furthermore, once iPhone production normalises again later this year, we expect IQE to benefit from content gains in the lower-end SE2 (Face ID) and iPhone 12 (5G + world-/rear-facing 3D sensing camera)," they said.

"Android OEMs are also finally ramping up their adoption of 3D sensing. Overall, despite short-term estimate risk, our view remains unchanged that 2019 was the trough for sales and earnings at IQE, and we maintain our Speculative Buy rating."


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