Analyst Note| Victoria Radke |
After a fresh look at Synaptics, we reaffirm our no-moat rating and maintain our $200 per share fair value estimate, as we maintain a cautious, yet positive, outlook on the firm’s penetration potential of the consumer Internet of Things space. As its legacy mobile and PC markets matured and growth opportunities diminished, Synaptics pivoted to focus investment efforts on consumer Internet of Things, which we view favorably. We think it is well positioned to capitalize on secular trends toward smart devices and experience-centric products in its Internet of Thing send markets. We expect the Internet of Things business to grow at a 17% CAGR through fiscal 2026, marginally ahead of the growth outlook for the broader consumer Internet of Things industry, as we believe the company is just starting to reap the benefits of its significant investments in that business over the past four years. The consumer Internet of Things industry is still in the growth phase of its life cycle, and we expect Synaptics will be able to carve out niches in the market by leveraging a deep and singular focus on AI-backed smart human-interface solutions. We note that these growing markets are characterized by intense competition and a deflationary pricing environment. As a result, we do not think Synaptics has a moat.