Replies to post #162007 on Value Microcaps Motherboard

[researcher59]

Wade: SYNA acquisition incremental EPS of $2.70 according to Needham sounds overly optimistic.

Sterne says $1.50 - and that's not until fiscal 2016, so a long way into the future.

IBD, 6/19 - Sterne Agee on Thursday raised its price target on touchscreen chipmaker Synaptics (NASDAQ:SYNA), saying the company's acquisition of Renesas SP Drivers, an Apple (NASDAQ:AAPL) chip supplier, will boost fiscal 2016 earnings by $1.50 per share.

Synaptics agreed to buy Japan-based Renesas SP Drivers last week for $475 million. Renesas SP Drivers makes display driver chips for mobile devices. Synaptics aims to integrate its touch technology along with Renesas' display driver into one chip, analysts say.

[cliffvb]

SYNA is strongest in higher end products. Their market share in low and middle end is growing but they also note those have lower margins. If Samsung is losing market share in that area, I would guess that others are gaining share. Those others could also be SYNA customers.

In the last CC, SYNA said they expect 40% sequential revenue growth in the soon to be announced quarter. Edit- SYNA actually raised their guidance again on June 10. They are now expecting 50% rev growth sequentially and 30-35% growth over the year ago Q, which had been a record for them.

SYNA has provided few details of their Renesas acquisition but it sure looks promising to me. They are paying $475 mil for it which is only .8X sales and 5X cash flow of Renesas. Lack of details is why there is so much variation in analyst estimates (any why some haven't even tried) so I expect they will be asked for more details about it in the coming CC. (SYNA is expected to discuss it in more detail on Analyst day in September.)

I think the biggest reason for SYNA's big drop recently stems from rumors that SYNA lost a spot in Samsung's Galaxy new Note 4 to STM. I also don't believe that rumor has been confirmed yet. The Note 4 with its large 5.7" screen is scheduled for release in September.

Bottome line, I personally think SYNA is a strong buy here. Unfortunately, I raised my own target price from $90 to $100 so I didn't sell in the previous run-up. I expect another one is coming though.