Synaptics Incorporated (SYNA:NSD) is a leading provider of human interface solutions for various devices such as smartphones, laptops, tablets, and smart home products. The company offers touch controllers, fingerprint sensors, display drivers, audio and video processors, and wireless connectivity solutions. Synaptics serves customers in the consumer electronics, mobile, PC, automotive, and IoT markets.
Synaptics Stock-Q3 Earnings Analysis:
Synaptics reported its third quarter fiscal 2023 results on May 3, beating analysts’ expectations on both revenue and earnings. The company posted revenue of $326.6 million, down 30.5% year-over-year (YOY), but above the consensus estimate of $323.4 million. The company attributed the revenue decline to the divestiture of its mobile LCD TDDI business in July 2022.
The company’s adjusted earnings per share (EPS) came in at $1.89, down 49.6% YOY, but above the consensus estimate of $1.84. The company said its earnings were impacted by higher operating expenses related to its acquisition of DisplayLink and higher taxes.
Synaptics Q4 Guidance:
Synaptics also provided guidance for the fourth quarter of fiscal 2023. The company expects revenue to be in the range of $340 million to $360 million, representing a YOY growth of 10% to 16%. The company expects adjusted EPS to be in the range of $2.00 to $2.40, representing a YOY growth of 11% to 36%.
Synaptics said it expects to benefit from the strong demand for its PC and IoT products, driven by the work-from-home and learn-from-home trends amid the pandemic. The company also said it expects to see growth in its mobile and automotive segments, as it leverages its touch and display solutions for next-generation devices.
Is Synaptics Stock a Buy or Sell?
Synaptics stock has gained about 19% in the past year, outperforming the S&P 500 index, which has gained about 16%. However, the stock has declined about 9% year-to-date, underperforming the S&P 500 index, which has gained about 10%.
The stock currently trades at a trailing price-to-earnings (P/E) ratio of 18.3, which is below its five-year average of 23.4 and the industry average of 25.8. The stock also trades at a forward P/E ratio of 13.8, which is below its five-year average of 15.9 and the industry average of 17.7.
Synaptics stock has a Strong Buy consensus rating. The average price target of $125.83 implies a potential upside of about 55.3% from the current price of $81.02 as of May 17.
SYNA stock also has a fair value estimate of $88.00 by Morningstar analysts, who assign a narrow economic moat rating to the company. A narrow economic moat rating means that the company has some sustainable competitive advantages that can protect its market share and profitability from rivals.
Strengths:
The main strengths of Synaptics are its diversified product portfolio, its innovation capabilities, its customer relationships, and its scale advantages. The company has been investing in new technologies such as OLED displays, haptic feedback, voice and face recognition, and edge computing to enhance its human interface solutions.
Risks:
The main risks for Synaptics are the cyclical nature of the consumer electronics market, the competitive pressure from other suppliers and chipmakers, the potential supply chain disruptions due to the global chip shortage, and the regulatory uncertainties related to trade tensions between the U.S. and China.
The Takeaway:
Based on these factors, Synaptics stock may be a buy for long-term investors who are looking for exposure to the human interface solutions market. The company has a solid track record of revenue and earnings growth, a reasonable valuation, a positive outlook for its core segments, and a moderate buy rating from analysts.
However, investors should also be aware of the risks and challenges that Synaptics faces in its industry and be prepared for some volatility in the stock price due to market conditions and external factors.
