Today we have a very speculative idea: take shares in high-tech component supplier Synaptics (NASDAQ: SON), in order to capitalize on the hype around the Internet of things.
Growth potential and validity: 17,5% behind 14 Months; 36,5% behind 26 Months; 12% per annum during 15 years.
Why stocks can go up: because the Internet of things seems to many to be a very promising direction.
How do we act: we take shares now for 212,64 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
SYNA makes high-tech components for complex electronics. She assembles them from parts, produced by other companies.
According to the company's annual report, its revenue is divided into the following segments:
- Internet of Things - 43,3%. Everything, what is the wireless connection: Wi-Fi, bluetooth, GPS, as well as chips for displays and keyless control panels, solutions for smart appliances.
- PC Solutions - 26,5%. Touchpads and systems for "reading" fingers with an electronic system, solutions for advanced keyboards.
- Solutions for mobile devices - 30,2%. Smartphone solutions in the broadest sense: from providing the work of tablets to augmented reality systems.
SYNA Clients - Companies, which produce sophisticated high-tech products, or at least those companies, under whose brand electronics are sold, assembled by contractors.
Revenue by country and region:
- China - 39,11%.
- Taiwan - 28,5%.
- Japan - 24,68%.
- Other, unnamed countries - 5,18%.
- South Korea - 2,12%.
- USA - 0,41%.
Arguments in favor of the company
Fell down. Over the past few months, the company's shares have fallen sharply.: from 292 to 212,64 $. They collapsed largely under the weight of their high cost., but still we can count on a rebound of these stocks.
Promising. From the description of the company's business and the dynamics of its financial performance, it can be seen, that the focus on the Internet of things will be a boon both for SYNA itself, and for its shareholders: in the last quarter, this segment gave about 60% all proceeds.
The company's mobile and desktop segments were also promising.: demand in these areas is still ahead of supply and the endless pandemic helps maintain demand at a high level. But still, the sphere of the Internet of Things is seen as the most promising way for the development of the company..
So far, society and consumers are only taking the first steps in this area., but, given the potential practical benefits, only a technological counter-reformation can reverse this process. All in all, I think, what lies ahead for SYNA's many years of growth. And the halo of prospects will contribute to the influx of investors into these shares, greedy for everything promising.
Relatively inexpensive. Company P / S — 5,91, and the capitalization is not very large - 8.38 billion. The problem could be her P / E, but, Considering, that over the past year and a half, due to the transition to a more marginal area of the Internet of Things, the company has been increasing its gross and operating margins, the situation will soon begin to change. A couple of years ago SYNA 80% made revenue from the sale of spare parts for the screens of buttonless smartphones, and half of the proceeds were given to her by Apple alone.
Anyway, there are already prerequisites for investors to enter these shares. The company doesn't look very cheap., but not yet seen in her premium price, which investors could put into it, taking into account the extreme prospects of the direction, in which SYNA moves.
Can buy. All of the above factors make it very likely if someone does not buy SYNA, then its partnership with some technological giant - such news will also lead to an increase in SYNA quotes.
However, can buy it too. It is likely to be bought by a large private foundation or private consortium, to bring it to the stock exchange in a year and a half or three years, when the topic of the Internet of Things will be on everyone's lips and there will be an opportunity to hold a new IPO SYNA, ripping off investors a lot of money.
What can get in the way
Accounting. The company has a fairly large amount of debt: 1,503 billion dollars, of which only 365.2 million must be repaid during the year. The company has enough money, to close all urgent debts, but not for that, to close all debts: 502,8 million on accounts and 312.2 million debts of counterparties.
However, it's worth noting here, that the growth of the company's profitability can neutralize these risks in the eyes of investors. Or maybe not level: SYNA spends a lot on expanding and modernizing the business, therefore, there are prerequisites, that the amount of debt will grow. This can be a problem, as loans will soon rise in price and companies with a large amount of debt will scare away some investors.
Concentration. According to SYNA Annual Report, a number of unnamed clients give her a disproportionate percentage of revenue: 14, 13 And 10%. A change in relationship with one of them could negatively impact SYNA's reporting.
China. A significant share of the company's sales is in China, which puts her in a vulnerable position: news of Washington's major sanctions against China's technology companies could hurt its stocks.
Ambiguity. Most of the company's assets are located abroad, she does business all over the world, and this can lead to serious losses due to logistics. However, the company's recent report shows, that while these difficulties are not reflected in it. Will hope, this state of affairs will not change.
Price. P / E companies — 60. That's a lot., and in the conditions of stock market instability, stocks may fall even more. Still, the average investor is rustic., rarely analyzes the issuer's business and is prone to panic. This makes SYNA shares volatile., regardless of her prospects.
What's the bottom line?
We take shares now by 212,64 $. And then there are three options.:
- wait for growth until 250 $. Think, taking into account all the positive aspects, we will reach this level in the next 14 Months;
- wait for quotes to return to the level 292 $. Think, here you should count on 26 months of waiting: need time to do so, so that the hysteria around the Internet of Things gained momentum among investors;
- hold shares 15 years, to see, how a company will become a technological colossus.
And you should remember, that this idea is volatile. So if you're not ready for that, that these stocks will shake, it's best not to touch them..
