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IQE’s earnings upgrade cycle accelerates
Earnings forecasts have been raised again for compound semiconductor technology IQE (IQE:AIM) and the positive trend is expected to continue through 2017.
Analysts at broker Canaccord Genuity increased their 2017 revenue estimate by £6m to £144m. Number crunchers at N+1 Singer have also upped their earnings per share (EPS) estimates.
That leaves new average EPS forecasts at 3.1p to 3.2p, ahead of the previous 2.9p consensus level.
Both Canaccord and N+1 Singer upped their forecasts several times through 2016 as the company’s early promise in photonics and infrared technologies emerged. Shares flagged the potential from IQE’s photonics capabilities in September 2016 with the shares trading at 30.25p, then again in December at 35.75p. The shares are now trading at 61.25p.
Photonics was the standout performer as IQE reported overall revenues up 16% for the year to 31 December 2016. Photonics sales jumped 43% to £22.8m, compared to the 15% growth of its larger wireless division.
IQE aims to be in the vanguard of the world’s first compound semiconductor technology cluster in South Wales. Compound semiconductors use high-tech coatings, such as Gallium Arsenide or Gallium Nitride, to create more advanced types of microchip than silicon-based processors.
The Cardiff-based company is part-funding a specialist compound semiconductor development centre alongside Cardiff University. The project will get £50m backing from the Government plus an extra £100m could become available from Innovate UK, a body set up to develop and promote science and technology across Britain.
Investing for the future
‘We believe this level of investment confirms the growing importance of compound semiconductor technology to the electronics industry and its potential to replace silicon in many applications,’ explains Canaccord analyst Paul Morland.
‘This view is also supported by a number of deals during 2016, such as the acquisition of Epiworks by II-VI and the formation of a joint venture by Qualcomm and TDK, to pursue applications of advanced materials.’
Years of R&D are on the cusp of paying off for IQE. We continue to see value in the long-term investment. (SF)