Citi: Buy Synnex On 'Rare Opportunity'

In a report published Thursday, Citi analyst Jim Suva maintained a Buy rating and price target of $88 on

, given that the stock offers a "rare opportunity" to see the profits and the underlying fundamentals of Synnex change. The stock declined 13 percent last week, following the disappointing earnings report. However, during its "well-attended" investor day on July 1, the company announced new operating targets, with 6-10 percent total sales growth, driven by 5-10 percent growth in the Technology Solutions business and 7-10 percent growth in the Concentrix business. In addition, Synnex's new operating profit goals in the low-to-mid 3 percent for FY15-FY17 is marginally higher than the estimates. "The company is committed to making more strategic acquisitions with a focus on higher margin business in both Concentrix and its TS segments and this is not included in their outlook as such transactions have not yet been announced," Suva stated. The analyst believes that Synnex is in the early stages of implementing a permanent change that could drive margins higher, from 2.3 percent in 2014 to 3.4 percent in 2017. The analyst also believes that investors have not yet fully understood the magnitude of the change that is beginning at the company. According to the Citi report, "Synnex was very clear that they see the operating losses from its new customer in its Concentrix business going to profitability by the end of the year and the company is actively discussing new terms and scope of its business which indicates to us both parties are interested in a winwin solution."