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Here's Why You Should Hold Synaptics Stock in Your Portfolio

Zacks Equity Research
Updated
Here's Why You Should Hold Synaptics Stock in Your Portfolio
Let's take a look at the reasons why investors must retain Synaptics (SYNA) stock.

Synaptics SYNA earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive earnings surprise of 4.7%.

With expected long-term earnings per share growth rate of 10% and a market cap of $1.63 billion, it seems to be a stock that investors should keep in their portfolio for now.

Let’s take a look at the factors that have been influencing the company’s performance.

Synaptics is largely gaining from its Consumer Internet of Things (IoT) products, which generated revenues of $96.4 million in fourth-quarter fiscal 2018, up 319% from the year-ago quarter. Notably, a surge in demand for smart homes, smart devices, Automotive, VR, as well as voice and video-enabled products is aiding this segment.

Recently, the company announced that TCL Corporation has adopted its AudioSmart far-field voice (FFV) technology for television sets that have Alexa, the smart speaker from Amazon AMZN, built in. Synaptics’ clientele already includes the likes of Baidu BIDU and Samsung.

VideoSmart as well as the automotive sections of the IoT segment are gaining significant traction. The company’s strengthening footprint in this high-growth segment is expected to boost investors’ confidence in the stock going ahead. Synaptics stock has gained 18.3% year to date against the 7.6% decline of the industry it belongs to.



However, the company is facing hurdles in the Mobile Products segment, primarily due to weakness in the smartphone market. The company expects the weakness to continue in the second half of the calendar year as well. As this particular segment is the majority contributor to the top line, revenues will remain under pressure for some time now.

Nevertheless, Synaptics is looking to tap the growth areas in other segments. The company recently introduced solutions for virtual reality (VR) head-mounted displays. Synaptics expects to better cater to the augmented reality (AR) and virtual reality (VR) requirements of gaming, movies as well as medical industries.

The company is also collaborating with partners to develop a platform that will aid television service providers in offering improved Pay TV services. These along with established partnerships with the likes of Microsoft MSFT and Advanced Micro Devices are expected to aid Synaptics going ahead.

All these justify this Zacks Rank #3 (Hold) stock’s retention in investors’ portfolio.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zacks Investment Research