This post was just published on ZYX Buy Change Alert.
Only about a month ago SYNA was purchased at $55.87. As of this writing, the stock is trading at $78.45, up about $12 for the day in the after market.
SYNA now sees FY14 revenue $933M-$943M, consensus $918.5M. SYNA raises Q4 revenue view to $300M-$310M from $275M-$295M. SYNA updated its Q4 revenue outlook after it announced that it has signed a definitive agreement to acquire all of the outstanding equity of Renesas SP Drivers. For Q4, Synaptics expects to report record revenue in the range of $300M-$310M, up from its previous guidance of $275M-$295M, consensus $285.75M. The improved revenue guidance is driven by better than expected performance for both mobile and PC products.
SYNA to acquire Renesas SP Drivers for $475M Synaptics announced that it has signed a definitive agreement to acquire all of the outstanding equity of Renesas SP Drivers, the industry leader in small and medium-sized display driver ICs for smartphones and tablets. With the acquisition, Synaptics expects to increase its addressable market opportunity by 1.5X and to accelerate its product roadmap for touch-and-display driver integration. Synaptics will pay a purchase price of approximately $475M for 100% of Renesas SP Drivers, based on $515M enterprise value. The purchase price is based on cash and other adjustments and is subject to customary adjustments for net working capital, net debt, and third party expenses. For the year ended March, Renesas SP Drivers’ revenue and cash flow were approximately $650M and $100M, respectively. The combined business of Synaptics and Renesas SP Drivers is expected to create significant revenue and investment scale to drive future growth and operating leverage. The acquisition will be immediately accretive to Synaptics’ non-GAAP EPS, excluding transaction related expenses. The acquisition is expected to close in the fourth calendar quarter of 2014, subject to customary closing conditions and regulatory reviews, as necessary.
The new buy zone is $55-63.31. Due to high volatility consider limiting the position size to 35% of the full core position size. It is worth repeating that this position is suitable for aggressive investors only.
What to do now?
Normally the call would be to take partial profits in the after market. SYNA is very volatile and can easily give up the gains. However in this case our target is $100-110; also the stock did not dip deep in the buy zone, so many subscribers may not be holding the recommended 35% position. For these reasons, it is a matter of personal preference to take partial profits here or not. For tracking purposes, partial profits will be taken right here in the zone of $78.30-79.45.
Those not in the stock may wait for a dip in the buy zone.
Experience traders willing to take the loss can consider starting a small scale in the zone of $66-71.27 with $83-87 near term target and a tight stop. However most investors may want to wait for a bigger dip in the zone of $55-63.31 at the risk of missing the opportunity.