IQE, Spirent both tumble as Barclays cuts ratings in tech sector review

Chipmaker IQE was cut to ‘equal-weight’ from ‘overweight’ due to weak near-term fundamentals and lack of visibility

Chip wafers
Spirent was downgraded to ‘underweight’ from ‘equal-weight’,

Analysts at Barclays pulled the rug out from under two UK mid-cap technology stocks on Wednesday, downgrading their ratings for both semiconductor maker IQE PLC (LON:IQE) and telecoms equipment firm Spirent PLC (LON:SPT) in a review of the European sector.

In a note to clients, the analysts said they had cut their stance for IQE to ‘equal-weight’ from ‘overweight’ due to weak near-term fundamentals and lack of visibility, reducing their target price to 55p from 73p with the stock trading at 45.86p, down 4.5% on Wednesday’s close.

Meanwhile, they downgraded Spirent to ‘underweight’ from ‘equal-weight’, as despite very strong operations its 2019 performance and, therefore valuation, was among the highest in its coverage.

However, they upped Spirent’s target price to 190p from 150p albeit with the stock trading at 228p, down 8.1% on Wednesday’s close.

European upgrades 

Overall, the Barclays analysts noted that stock appreciation in the technology sector in 2019 was impressive, particularly so for semiconductors, which was comfortably the best performing sub-sector of the European market.

They added: “While it would be hard to repeat such a performance in 2020, and we hear investors questioning how to be positioned for this year, we think there are some attractive opportunities in both semis and even in telecom equipment.”

For semis, the analysts expect the cycle to benefit all names, but they retain a preference for Dutch firm ASML, France’s STMicro and German group Dialog.

They upgrade Germany’s Aixtron to ‘overweight’ and Frankfurt-listed peer Infineon to ‘equal-weight’, but maintain AMS at ‘underweight’ given concerns over its Osram acquisition.

In telecom equipment, the analysts noted that shares generally struggled last year, but they think Sweden’s Ericsson is well positioned for 2020 and unloved, leading them to upgrade its stance to ‘overweight’ from ‘equal-weight’.

Quick facts: IQE PLC

Price: 39.04 GBX

Market: AIM
Market Cap: £310.94 m

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