Why I’d still shun the IQE share price at 50p

first_imgSimply click below to discover how you can take advantage of this. See all posts by Rupert Hargreaves I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Over the past few months, the IQE (LSE: IQE) share price has outperformed the broader market. Indeed, the stock is up more than 100% from its March low.Investor sentiment towards the semiconductor consultant and manufacturer has improved following a positive trading update from the company at the beginning of June.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…However, despite this performance, and the company’s improved outlook, several factors suggest it may be best to avoid the IQE share price.IQE share price problemsThe IQE share price has outperformed since March and the group now expects to return to profitability in 2019. In its latest trading update, the company said it expects at least a 27% jump in revenue for the first half.It anticipates a return to profitability due to the strong performance of its wireless equipment & light sensors businesses. Management believes the rollout of 5G phones using IQE’s kit will offset any coronavirus related impact on operations.Previously, IQE was expecting to return to profit in 2021. So the recent update implies the business is a year ahead of projections.However, the company has a history of missing expectations. Profits have fallen every year since 2015. Over the same period, sales have risen by about 23%. These figures infer that the company is struggling to compete in a highly competitive market. As such, the recent positive performance may not last.The group’s balance sheet has also deteriorated. Since 2017, the IQE share price has spent £46m in cash and taken on £64m in debt. As profits have only fallen during this time, there’s little to show for this additional spending.OvervaluedOn top of the company’s lack of progress over the past few years, it also looks expensive at current levels.At the time of writing, the IQE share price is dealing at a 2021 P/E of 52. That makes the business one of the most expensive companies on the London market. It’s even more expensive than the group’s larger, more profitable international peers.As such, while the IQE share price might have benefited from the coronavirus crisis, it may be best to avoid the stock after the recent gains.There’s no guarantee the company can meet the market’s expectations for growth, especially considering its track record. If the group fails to live up to those expectations, the shares could fall substantially in the near term. With that being the case, it may be sensible to take profits after the stock’s recent performance. However, if you’re willing to take on the risk, this is one of the few semiconductor companies trading in London today. As technology investments go, the IQE share price is one of the best ways for investors to bet on the sector, despite its problems.Therefore, if you’re interested in owning the stock, putting the IQE share price in a diversified portfolio may be the best approach. Why I’d still shun the IQE share price at 50p Rupert Hargreaves | Sunday, 5th July, 2020 | More on: IQE Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. “This Stock Could Be Like Buying Amazon in 1997”center_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Enter Your Email Address Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Our 6 ‘Best Buys Now’ Shares Image source: Getty Images last_img read more