Needham & Company Downgrades Synaptics (SYNA) to Hold; Secular Risks in the Notebook Segment

September 12, 2012 7:31 AM EDT
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Price: $54.61 --0%

Rating Summary:
    13 Buy, 6 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 7 | Down: 8 | New: 1
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Needham & Company downgraded Synaptics (NASDAQ: SYNA) from Buy to Hold.

Analyst, Rajvindra S. Gill, said, "The primary rationale behind the downgrade is our near term and long term concerns in the notebook segment, which accounts for ~50% of overall sales. In the near term, the datapoints in the PC supply chain have worsened over the last 30 days, and we think December consensus estimates of 13% sequential growth are at risk. Intel’s reduced outlook/commentary, the negative monthly results from the Taiwanese ODMs and weak results from Dell (Nasdaq: DELL) and H-P (NYSE: HPQ) indicate a below seasonal PC market in C3Q and C4Q. While the PC supply chain is anticipating a snap back in PC orders in November and December following Windows 8 (Nasdaq: MSFT) launch on Oct 26, we believe the sell-through could prove ultimately disappointing. Longer term, we believe the overall notebook market is in a secular decline driven by the threat of cannibalization from tablets (Amazon Kindle (Nasdaq: AMZN), Google Nexus (Nasdaq: GOOG), iPad (Nasdaq: AAPL), etc), demand stagnation in the mature markets and a slowdown in emerging markets. Separately, while we still believe In-Cell is a game-changing technology in the capacitive touch market and SYNA is the best-positioned to capitalize on this trend, we believe the anticipated weakness in the notebook market combined with tougher pricing and mix shift in the handset market could offset these gains."

FY13 EPS estimate lowered from $1.60 to $1.35 and FY14 from $1.85 to $1.60.

For an analyst ratings summary and ratings history on Synaptics click here. For more ratings news on Synaptics click here.

Shares of Synaptics closed at $28.40 yesterday.

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