SYNA - Synaptics Should Snap Back Over The Next Year

2024-07-05 15:18:34 ET

Summary

• Synaptics has seen a painful inventory correction cycle undermine its revenue and margins even more than I expected, hitting the share price as well.
• Business should be set to recover from here, with a return to double-digit growth within a few quarters and 20%+ growth in 2H'25.
• The company's focus on AI-enabled edge devices, including the new Astra platform, should drive the next era of growth, but I would like to see an expanded focus beyond the consumer.
• Mid-teens growth over the next five years, high single-digit long-term revenue growth, and improving margins can support a fair value of $100 or higher.

It’s been a rough 18 months since my last article on Synaptics ( SYNA ). I had concerns about still-elevated inventory levels at customers then, but I underestimated just how elevated those inventories were, and business has tumbled since then. The fact that other IoT-driven chip companies like Silicon Labs ( SLAB ) have had it just as bad (or worse) is cold comfort at best....

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