RBC Analyst Sees Growth Potential In TD Synnex Despite Short-Term Margin Pressures

Zinger Key Points

RBC analyst maintains a $145 price target for TD Synnex, citing growth in billings and strong free cash flow.
TD Synnex's third-quarter and second-half guidance is seen as conservative, with upside potential in earnings.
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RBC Capital Markets analyst David Paige reiterated an Outperform rating on TD Synnex Corp. SNX and maintained a $145 price forecast, citing strong billings growth, solid free cash flow, and conservative guidance positioning the company for potential outperformance in the second half of fiscal 2025.

Paige’s $145 price target is based on 10.5 times his calendar 2026 EPS estimate of $13.69, above TD Synnex’s five-year average of 9.7 times. This reflects confidence in a re-rating driven by margin improvement and a recovery in IT spending.

Paige noted that the company’s third-quarter and second-half fiscal 2025 guidance appears conservative. Estimates are above consensus due to strong PC demand, a rebound in networking, and growth in Hyve.

The company expects Q3 adjusted EPS of $2.75–$3.25, slightly below the consensus estimate of $2.96. Revenue guidance is $14.7B—$15.5B, and gross billings are $21B—$22B.

The company also reaffirmed its $1.1 billion free cash flow target for fiscal 2025, supporting its shareholder-friendly capital allocation strategy.

Despite some risks in July and August and potential weakness in Asia-Pacific, Paige sees upside potential for full-year earnings, projecting adjusted EPS of $12.10, above the company’s guidance of $11.50–$12.00.

Paige also highlighted Hyve’s momentum, supported by 19% growth, improved working capital and expanding capabilities. Networking’s return to growth is seen as a positive, with steady demand expected moving forward.

The analyst attributes double-digit growth to strong demand from SMBs, MSPs, and public sector customers, with no major risks expected from government efficiency initiatives.

The analyst flagged margin pressures, with gross margin down 21bps year over year to 4.8%, impacted by Hyve’s mix and unrealized losses. However, Hyve margins are expected to improve in the second half of fiscal 2025.

Price Action: At the last check on Wednesday, SNX shares were trading lower by 1.62% at $134.62.

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