Synaptics, Inc. (NASDAQ: SYNA)
Synaptics, Inc. a maker of ‘touch’ technology used in smartphones, tablets and computers, closed up 27.3% on Wednesday after a report that the company rejected an unsolicited bid from a Chinese firm valued at $110 per share. Shares saw steady buying after some mid morning profit taking and closed near the high of the day at $82.46 on more than 9x average daily volume.
The report from a pair of Bloomberg analysts is based on several unnamed sources that appear to be close to the ongoing discussions between the Chinese suitor and Synaptics. The authors point out that the Synaptics bid is consistent with Chinese president Xi Jinping’s efforts to move the country away from its reliance on technology imports. They also note that Synaptics stock has fallen significantly from a June high of $102.50 due to forecast that the touchscreen device market will begin to fall. Those forecasts, so far, have been wrong, and Synaptics expects revenue to rise by 53% this year. The implication is that the stock is oversold and that the $110 offer indicates a reasonable valuation. Bloomberg
According to Bloomberg, Synaptics’s CEO Rick Bergman stated, “The company will not comment on rumors”. Hmmm, this type of response usually indicates that the report is true.
Synaptics has enjoyed explosive growth as their technology has set the standard for ‘touch’ solutions across all platforms. Mobile tech giants such as Apple and Samsung are among the biggest customers. In the 2 years from June 2013 to June 2015 revenue has more than doubled from $663.6 million to $1.7 billion.
The company recently reported record-breaking revenue and income for both fiscal year 2015 and the quarter ending June 30, 2015. Net revenue for the fiscal year was $1.7 billion, an 80% increase over 2014, while net income for the period was $112.3 million, or $2,89 per diluted share. Net revenue for the fourth quarter of fiscal 2015 grew 52 percent over the comparable quarter last year to a record $478.9 million. Net income for the fourth quarter of fiscal 2015 was $33.3 million, or $0.85 per diluted share. PR Newswire
SYNA Technical Analysis
Just like all ‘buyout’ movers, the price action in SYNA today negates most of the short-term technical indicators. Over the next few days, price and volume are all important. If buyout discussions are real, I would expect the stock to find strong support near the 200 day MA of $80.05. If it breaks this support, I would likely exit and look to reenter if the selling volume is modest and the stock finds support at $76.
If SNYA price continues to climb, I will be watching for resistance in the $85 – $86 range. If it gets through that area on strong volume, I will put in trailing stops and let it run.
The stock has a relatively low float of 36 million shares of which 3.8 million or 10.5% are short. Yesterday 6.6 million shares traded. While I doubt all the shorts are out, I do assume much of the action was a short squeeze. If the stock runs this morning, I would expect another squeeze.
About Synaptics Incorporated
Synaptics Incorporated is a developer and supplier of custom-designed human interface solutions that enable people to interact more easily and intuitively with a wide variety of mobile computing, communications, entertainment, and other electronic devices. The portfolio includes Display Driver ICs (DDICs) which drive high-performance displays for smartphones and tablets. The ClearPad family supports touchscreen solutions for devices ranging from entry-level mobile phones to flagship premium smartphones, tablets and notebook PCs. The TouchPad family, including ClickPad and ForcePad, is integrated into the majority of today’s notebook PCs. Natural ID fingerprint sensor technology enables authentication, mobile payments, and touch-based navigation for smartphones, tablets, and notebook computers. Synaptics portfolio also includes ThinTouch supporting thin and light keyboard solutions, as well as key technologies for next generation touch-enabled video and display applications. Google Finance