Recent checks in Taiwan indicate significant price increases for display drivers and touch controllers, suggesting Synaptics, Incorporated’s (NASDAQ:SYNA) margin should inflect, according to Cowen.

The Synaptics Analyst: Karl Ackerman upgraded the rating for Synaptics from Market Perform to Outperform, while raising the price target from $130 to $176.

The Synaptics Thesis: There is increased confidence on “the stability of Mobile and PCs while the wireless and audio portfolio support profitable growth,” Ackerman said in the upgrade note.

The analyst mentioned four reasons for believing there is upside to the current Street expectations for fiscal 2022:

• Recent checks indicate “very robust pricing momentum for touch and display driver ICs from peers in Asia.” He wrote further, “Capacity constraints are limiting SYNA’s ability to fulfill robust order momentum, but price actions by peers should provide a large umbrella to extract higher value from SYNA’s offerings.”
• Commentary from peers so far in the ongoing earnings season “underscores robust notebook demand that should remain healthy through year-end.” This drives the PC segment as well as the IoT business via DisplayLink, which is the highest margin business within the company’s portfolio.
• The Mobile segment, which contributes 40% of Synaptics’s sales, “should stabilize from here as content opportunities at Samsung, Oppo, Vivo and Xiaomi offset well-known content declines at Apple,” Ackerman said.
• Given that the company’s stock trades at a meaningful discount to peers, “valuation provides a strong backstop,” he added.

SYNA Price Action: Shares of Synaptics had risen by 4.29% to $145.50 at the time of publication Tuesday morning.

(Photo: Synaptics)