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Analysts Bullish on Synaptics (SYNA) as IoT Market Expected to Surpass Expectations

By Don Francis, Editor
February 10, 2024 9:47 AM UTC
Analysts Bullish on Synaptics (SYNA) as IoT Market Expected to Surpass Expectations

Rosenblatt's Kevin Cassidy raised their price target on Synaptics (NASDAQ: SYNA) by 18.2% from $110 to $130 on 2024/02/09. The analyst maintained their Strong Buy rating on the stock.

Synaptics, a semiconductor product solutions company, reported its quarterly earnings for Q2 2024 on February 8th, 2024. The company's results exceeded expectations, largely due to its effective cost management. Cassidy, in summarizing Synaptics' Q2 2024 print, expressed optimism about the IoT (Internet of Things) market, predicting that it could surpass expectations as last year's winning designs enter production. Furthermore, Cassidy is bullish on Synaptics' prospects for growth in the IoT, mobile, and eventually enterprise segments.

For Q2 2024, Synaptics reported earnings per share (EPS) of $0.57, beating the Zacks Consensus Estimate of $0.46. However, it fell short of Q2 2023's EPS of $2.20 by 74.1%. The company's revenue for the quarter was $237 million, surpassing the Zacks Consensus Estimate by 0.63%. However, it decreased by 32.9% compared to Q2 2023's revenue of $353.1 million. The gross margin for Q2 2024 was 52.5%, down from Q2 2023's 59.8%.

Looking ahead to Q3 2024, Synaptics' management provided guidance. They expect revenue in the range of $220 million to $250 million, with a gross margin between 52% and 54%. The company also anticipates operating expenses (Opex) of $94 million to $98 million. President and CEO Michael Hurlston highlighted two key points for the quarter. Firstly, he stated that the overall business has stabilized, reaching the bottom of its cycle. Secondly, Hurlston expressed optimism about the Core-IoT area, particularly wireless products, which are expected to see revenue improvement and sustained growth going forward. Hurlston also mentioned that Synaptics showcased its MPU and MCU product offerings at the Consumer Electronics Show in January 2024, receiving positive feedback from potential customers.

CFO Dean Butler added that total channel inventories continued to decline in Q2, and they anticipate a significant increase in topline revenue for Core IoT products in Q3. However, while some products are showing signs of growth, others are still affected by inventory accumulation, declining demand, and seasonal effects. As a result, Synaptics expects consolidated Q3 revenue to remain flat compared to Q2. Butler also emphasized the company's strong positive cash flows and healthy balance sheet, enabling continued investment in technology roadmaps.

In addition to Cassidy's rating, other analysts also updated their ratings on Synaptics on February 9th, 2024. KeyBanc's John Vinh raised their price target by 8% to $135 and maintained a Strong Buy rating on the stock. Needham's Quinn Bolton raised their price target by 8.7% to $125 and maintained a Buy rating. Mizuho's Vijay Rakesh lowered their price target by 2.4% to $124 but maintained a Strong Buy rating.

Currently, all top-rated analysts rate SYNA as either a Strong Buy or Buy. No analysts consider it a Hold, and none recommend or strongly recommend selling the stock.

Following Synaptics' latest quarterly report, the stock price experienced a 1.8% increase. However, compared to the previous year, the stock is down 9.9%. During this period, Synaptics has trailed the performance of the S&P 500, which has declined by 23.2%.

Kevin Cassidy, the Rosenblatt analyst who raised the price target on Synaptics, is ranked in the top 3% of Wall Street analysts by WallStreetZen. With an average return of 16.8% and a win rate of 55.6%, Cassidy specializes in the Technology and Consumer Cyclical sectors.

Synaptics Incorporated, headquartered in San Jose, California, develops, markets, and sells semiconductor product solutions globally. The company offers various products, including AudioSmart for voice and audio processing, ConnectSmart for high-speed video/audio/data connectivity, and DisplayLink for transmitting compressed video frames across low bandwidth connections. Additionally, Synaptics provides Natural ID, a fingerprint ID product used in various applications, and TouchPad, a touch-sensitive pad. The company sells its products to mobile and PC OEMs, IoT OEMs, and automotive and consumer electronics manufacturers.

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