Computer chipmakers have seen demand for parts surge over the past 12 months. The rise of remote work, thanks to the pandemic, has led to a drastic uptick in demand for computers and computer parts. Despite this, however, some chipmakers have been flustered by manufacturing issues and an inability to keep up with demand. As such, some of the smaller chipmakers have taken this opportunity to grow their piece of the market pie, to so speak. One niche chipmaker, Synaptics (NASDAQ: SYNA), shot up after reporting strong Q4 financial results.
Just before the weekend, Synaptics announced that its Q4 revenue figures came in at $357.6 million. That’s actually a surprising decrease in comparison not a year ago. However, the company has seen its profitability surge big time. Earnings-per-share (EPS) came in at $2.30, compared to the $2.04 reported last year and outperforming Wall Street’s expected $2.13 per share.
The big deal for Synaptics is that its projected Q1 2020 results are looking incredibly optimistic. Revenue is expected to come in around $340 million, well above the $306 million that Wall Street was previously expecting. Synaptics has also been on a major buying spree over the past couple of years. Back in July, the company bought out DisplayLink for $305 million in cash before spending another $250 million to buy out Broadcom’s (NASDAQ: AVGO) Internet of Things (IoT) business.
For the most part, Synaptics used to be a mobile company, with less of an emphasis on chips for PC makers. However, the company is dedicating to making the switch, especially since the rise of trends such as IoT. In some ways, making chips for smaller devices is a good thing for smaller companies, as it tends to be impractical for the larger chipmakers to dominate each one of these smaller, niche markets. In contrast, Synaptics also provides chips for cameras, smoke detectors, doorbells, and most consumer devices that use some sort of wireless connection.
“Synaptics is an acquired taste. It trades at a perennial 30%+ discount to peers despite being a reputable fixture in the Valley,” said Oppenheimer analyst Martin Yang just before the weekend. “Many investors were conscious of its not-too-distant past of volatile, margin-destroying growth spurts. New management, since mid-2019, steered Syanptics away from a low-margin, mobile-centric, commodity solution provider to becoming a high-margin, IoT-centric vendor with differentiated solutions.”
Shares of Synaptics were up around 11.4% in response to the news, pushing the company’s market cap to around $4.2 billion. Over a 12-month period, Synaptics is up around 50%, which is decent but less than what other major chipmakers have seen over that same time period. Whether or not Synaptics will end up beating out the bigger chipmakers in the near future is still up in the air, but if you’re looking to check out an alternative chipmaker to the big giants in the industry, give Synaptics a look through.
Synaptics Company Profile
Synaptics Inc develops human interface solutions that allow touch, display, fingerprint, video, audio, and voice functions for smartphones, PCs, automotive vehicles, consumer Internet of Things products, as well as other electronic devices. – Warrior Trading News
