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Stock Analyst Update

Synaptics Poised to Rebound in 2018

The undervalued firm continues to boast strong offerings in touch, display, and fingerprint sensors for smartphones.


On Tuesday, Dec. 12,  Synaptics (SYNA) highlighted growth initiatives and new products at its annual analyst day. The presentations support our view that the firm continues to boast strong offerings in touch, display, and fingerprint sensors for smartphones, while also showcasing new opportunities in consumer Internet of Things and automotive. The no-moat entity reiterated its financial outlook provided in the most recent earnings call, and we continue to view shares as attractive relative to our unchanged $64 fair value estimate.

Revenue growth guidance for the midterm remains 15% along with an increase in adjusted gross margin midpoint from 35.5% to 37%. Consumer Internet of Things currently accounts for roughly 25% of revenue and remains a chief growth engine for Synaptics as it solidifies its place through far-field voice and video processing solutions (from recent acquisitions: Conexant and Marvell’s multimedia solutions business, respectively). Within mobile, we think Synaptics will benefit from non-Samsung OLED capacity ramps and in-display fingerprint sensors, which management expects to exceed the 15% top-line growth target. Meanwhile, touch and display integrated solutions are forecast to rise in the mid-single digits, consistent with our model, while discrete display driver chips for LCD screens (most prominently for Apple), will decline considerably to serve as an offset due to the shift by Apple to OLED screens.

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Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.