Too Many Moving Pieces In Synaptics; Oppenheimer Downgrades

• Synaptics, Incorporated SYNA shares have declined 30.94 percent over the past three months, falling almost 4 percent in morning trade on Jnauary 20.
• Oppenheimer’s Andrew Uerkwitz has downgraded the rating on the company from Outperform to Perform.
• Uerkwitz expects the company’s ASP and units to come under pressure due to a slowdown in the mid-to-high end smartphone segment, with TDDI unlikely to offset the downside in the near term.

Analyst Andrew Uerkwitz mentioned that although fingerprint design wins had earlier been expected to pick up, now meaningful pricing pressure was expected in 2016, which was likely to erode any near term positives during the year.

According to the Oppenheimer report, “ASPs have been eroding severely in the core touch segment but could see a lift as we expect several OEMs to adopt force touch in CY16.”

However, Uerkwitz expects any such tailwind would be temporary, given the limited use cases on Android, and therefore unlikely to mitigate any longer term downward pricing trend.

“TDDI is the solution that we believe differentiates SYNA from the competition. We have a very favorable view of this opportunity. However, we believe adoption will be slow in 2016 and not enough to offset the risks,” the report added.

The FY16 and FY17 revenue and EPS estimates have been lowered due to expectations of slower TDDI revenue growth, decline in fingerprint sensor revenues and a moderate decline in PC and DDIC revenues.