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On Friday, Mizuho (NYSE:MFG) securities adjusted their financial outlook for Synaptics (NASDAQ:SYNA), reducing the price target to $90 from the previous $95, while maintaining an Outperform rating on the company’s shares. The adjustment follows Synaptics’ recent financial report, which presented in-line results for the December quarter and provided revenue guidance for the March quarter. According to InvestingPro data, the stock has experienced a significant 11.9% decline over the past week, though analysis suggests the company is currently trading below its Fair Value, presenting a potential opportunity for investors.
Synaptics’ revenue dynamics indicate a stabilization, according to Mizuho analysts, who believe the company is moving past its low point. Key observations from the report include an 8% quarter-over-quarter increase in March quarter Internet of Things (IoT) revenue, which accounts for 23% of total revenue, whereas the Enterprise segment, making up approximately 60%, is expected to see a 3% decrease. The licensing agreement with Broadcom (NASDAQ:AVGO) is anticipated to contribute an additional $40 million annually, benefiting from more than five years of licensing and the acceleration of Edge AI trends. InvestingPro data reveals the company maintains strong liquidity with a current ratio of 4.49, while operating with a moderate debt level.
The company’s Days of Inventory (DOI) decreased by roughly three days quarter-over-quarter to around 87 days, with management noting that inventory levels have largely normalized. Demand trends are showing signs of stability, with the Enterprise segment expected to improve and consumer demand projected to remain relatively stable despite typical March quarter seasonality. However, the automotive sector is still expected to exhibit weakness. With a gross profit margin of 46.3% and positive earnings forecasts, InvestingPro analysis indicates the company maintains robust profitability metrics despite current market challenges. Subscribers can access 7 additional ProTips and comprehensive financial analysis through the Pro Research Report.
Synaptics’ positioning is considered favorable for a potential upcycle in 2025, as the company boasts a robust WiFi/IoT product portfolio. Mizuho’s revised price target suggests a forward price-to-earnings ratio of approximately 19.2 times the calendar year 2026 estimates, aligning closely with the industry average of around 18.9 times. This reassessment comes amidst broader industry signals from peers such as Qualcomm (NASDAQ:QCOM), NXP Semiconductors (NASDAQ:NXPI), and Qorvo (NASDAQ:QRVO), which also indicate a bottoming out in the IoT sector. The company currently trades at a P/E ratio of 23.4x, with analysts maintaining a consensus Outperform rating and a price target range of $80-105.
In other recent news, Synaptics has seen significant development in its financial performance and leadership. Needham analysts have recently raised Synaptics’ stock price target to $100, maintaining a Buy rating, following the company’s financial performance that exceeded expectations for the first quarter of 2025. The company’s second-quarter guidance also surpassed forecasts. The company reported improved visibility into future performance, with a strengthening backlog and booking trends. Needham analysts project sequential growth of approximately $10 million starting in the June quarter, which they anticipate will continue throughout 2025.
Simultaneously, Synaptics has experienced a significant change in its executive leadership with Michael Hurlston resigning as President and CEO, taking on a new role at Lumentum Holdings Inc (NASDAQ:LITE). The Board of Directors has named CFO and SVP Ken Rizvi as the interim CEO. Despite the leadership shuffle, Needham analysts have reiterated their confidence in Synaptics by maintaining a Buy rating, highlighting the strategic initiatives and partnerships established during Hurlston’s tenure.
Lastly, Synaptics has provided a financial update, expecting second-quarter revenue to reach $267 million, slightly exceeding its previous forecast of $265 million. The company’s gross margin is anticipated to align with the midpoint of their guidance at 53.5%, with operating expenses slightly above the midpoint of $96 million. Additionally, earnings per share (EPS) are projected to surpass the midpoint of their guidance of $0.85. These are the latest developments in Synaptics’ journey.
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