Synaptics' Current Price Is Appealing

On Tuesday,

Management provided financial forecasts for the mid-term, including an average top-line growth rate of 15%. The attach rate of advanced solutions from Synaptics is projected to continue to rise, ultimately driving this target. In the near-term, strong growth in fingerprint sensors and TDDI will be offset by declines in display driver chips. The former segments have benefitted from increased diversification among a host of OEMs, in addition to more advanced products. Meanwhile, the latter will suffer from weaker ASPs at main customer Apple. We note that the firm’s margins will be hampered in the near-term as TDDI solutions currently have a lower initial gross margin profile (due to an elevated initial cost structure and focus on entry-level devices). However, as future generations of TDDI proliferate into more mainstream and flagship devices, we expect these headwinds to mitigate.

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