Synaptics Upgraded as KeyBanc Confident of Apple Contract

Synaptics is climbing after a KeyBanc analyst raised his rating on the chipmaker maker to overweight from sector weight.
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Shares of Synaptics (SYNA) - Get Report rose 2.5% to $67.94 Friday after a KeyBanc analyst raised his rating on the chipmaker to overweight from sector weight, saying that he was "increasingly confident" that the company would win a contract with Apple (AAPL) - Get Report.

Analyst John Vinh also set an $80 price target for the San Jose-based company's stock.

Vinh said in a note to investors that he was "increasingly confident" that Synaptics has secured the touch controller socket in the 2020 OLED iPhones. OLED, or organic light-emitting diode, screens feature self-illumination pixels.

"Synaptics is a leading provider of human-machine interface sensor solutions targeted at the PC, smartphone, and tablet end markets," he wrote. "The company commands a dominant position in the high-end smartphone and thePC notebook (touchpad) end markets."

Vinh said Synaptics' announcement last month that it was divesting its Asia-based, mobile LCD TDDI (touch and display integration) business to Hua Capital for $120 million in cash, along with a shift in gross margin revenue, "should drive multiple expansion."

"As Synaptics focuses on driving GM expansion through the TDDI divestiture," he wrote, "and with the ramp of OLED touch in the Apple iPhones, we see the opportunity for SYNA to rerate and trade at a higher multiple relative to its historical."

Despite recent appreciation in the stock over the past few months, Vinh said that "we still see the opportunity for meaningful upside and believe the stock can still work."

With the TDDI divestiture and OLED touch wins at Apple, Vinh said "we estimate SYNA can earn $6.14 in EPS in FY21."