Synaptics Stops Its Slide
By Troy Wolverton
TheStreet.com Staff Reporter
2/14/2005 2:40 PM EST
Talk about kicking 'em when they're down.
Credit Suisse First Boston analyst Scott Barnum slashed his price target on Synaptics (SYNA:Nasdaq - news - research) on Monday to $28 from $42, citing Apple's (AAPL:Nasdaq - news - research) decision to find a competitor for the company's products that are used in Apple's notebooks and iPod music players.
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However, the Street's worst fears about the company are overblown, Barnum said. Instead of eliminating Synaptics as a supplier for the iPod interface, Apple appears to be moving from a situation in which Synaptics is one of at least two main suppliers, he said. As such, the company will likely retain some 40% to 50% of the iPod business, he said.
"We believe the current stock price embeds a scenario that assumes the lost of most, if not all, of the iPod business to competition within a year. However, we see little reason for Apple to completely displace SYNA," Barnum said in his report.
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Still, prior to Apple's decision, the iPod contract was expected to comprise 30% of Synaptics' revenue and up to 50% of its operating income in its 2006 fiscal year, Barnum said. So, even if the company is only losing about half of that business, Synaptics will feel the loss, he said.
Factoring in both the PowerBook and iPod contracts, Barnum slashed his earnings outlook for Synaptics' fiscal 2006 to 95 cents a share from $1.30 a share. Similarly, he cut his earnings forecast for fiscal 2007 to $1.05 a share from $1.47.
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