Recommendation
Recommendation: BUY Current Stock Price: $68.45 (as of Sep 30, 2025) 1-Year Price Target: $95.64 Potential Upside: 39.7%
We initiate coverage on Synaptics, Inc. (SYNA) with a BUY recommendation. Our investment thesis is predicated on the market's significant underappreciation of Synaptics' successful strategic transformation from a legacy component supplier into a diversified, high-margin platform provider for the secular growth markets of the Internet of Things (IoT) and AI at the Edge.
Company Overview
Synaptics Incorporated develops, markets, and sells specialized semiconductor products that enable intelligent interactions for devices worldwide. The company's diverse product portfolio is built on a foundation of processing, wireless connectivity, sensing, and biometrics. These solutions are deployed across three primary markets: the high-growth Core IoT segment, Enterprise and Automotive, and the Mobile market. Synaptics acts as a strategic partner and supplier to many global Original Equipment Manufacturers (OEMs). The company's overarching strategy is a focused transition to become a pure-play Core IoT and Edge AI leader.
Product Portfolio
Synaptics' competitive advantage is built upon three integrated technology pillars. This platform approach reduces R&D burdens for OEMs, simplifies supply chains, and accelerates time-to-market.
Processing (Astra™): The Astra™ platform is the cornerstone of Synaptics' "AI at the Edge" strategy. It is an AI-native System-on-Chip (SoC) family engineered for real-time edge intelligence, handling advanced vision, audio, and sensor processing directly on the device. A key partnership with Google Research to co-develop AI accelerators for next-generation Astra processors validates this strategy.
Connectivity (Veros™): The Veros™ family of highly integrated wireless circuits provides essential connectivity for modern IoT devices. The portfolio is designed for speed, efficiency, and broad interoperability. Through strategic moves, including a Wi-Fi 7 agreement with Broadcom and the acquisition of Packetcraft for Bluetooth Low Energy (BLE) capabilities, Synaptics is building a comprehensive wireless portfolio.
Sensing (Touch, Display, Biometrics): This segment represents Synaptics' heritage and continues to be a source of significant innovation and cash flow. The company remains a leader in capacitive touch sensing, display drivers, and biometric solutions integral to smartphones, PCs, and automotive systems. This established business provides a stable revenue foundation that funds investment in the higher-growth Processing and Connectivity segments.
Investment Thesis
Our conviction in Synaptics is based on five key points:
First, SYNA is delivering explosive growth in core IoT. The Core IoT segment delivered ~53% revenue growth year-over-year in FY 2025. This segment is increasingly the centerpiece of Synaptics' growth story and could offset stagnation in legacy segments going forward.
Second, SYNA is expanding its market through strategic partnerships. A collaboration with Google integrates Synaptics' Astra AI-Native platform with Google's ML-Core, accelerating edge AI capabilities. An agreement with Broadcom provides access to best-in-class Wi-Fi 7/8, Bluetooth, and UWB technologies, tapping into billions in potential market growth.
Third, SYNA is maintaining margin resilience while strengthening its balance sheet. On a non-GAAP basis, Synaptics maintained gross margins of ~53-54% across FY 2025. The company also reduced gross debt by ~$134 million and repurchased ~$128 million worth of shares in FY 2025, strengthening financial flexibility.
Fourth, SYNA is benefiting from demand stabilization and backlog recovery. The company saw significant improvements in Q4 FY 2025 order activity and backlog. This is reflected in the strong Q1 FY 2026 revenue guidance of $380-$420 million, a ~13% YoY growth, which provides smoother revenue visibility for the upcoming fiscal year.
Fifth, SYNA is expanding its Total Addressable Market (TAM) by leading in edge AI and connectivity. Synaptics is leveraging its Astra AI-Native platform and new wireless licensing to target the growing edge AI and advanced wireless markets. With edge AI chips projected to reach $60-70 billion by 2030, Synaptics is positioned for significant long-term growth.
Risks
While the thesis is compelling, investors should monitor the following risks:
Competitive Pressures: The semiconductor industry is intensely competitive. Synaptics faces formidable rivals with greater scale and financial resources, such as Qualcomm, NXP, and STMicroelectronics, who could compete aggressively on price or R&D.
Execution Risk: Future success is contingent upon the flawless execution of its IoT-focused strategy. Delays in the product roadmap for the Astra™ or Veros™ platforms or a failure to secure key design wins could undermine the growth narrative.
Industry Cyclicality & Macroeconomic Headwinds: The semiconductor industry is inherently cyclical. A significant global economic downturn could reduce consumer and enterprise spending on end-products, directly impacting demand for Synaptics' components.
Customer Concentration: As a supplier to major OEMs, Synaptics is exposed to customer concentration risk. The loss of, or a significant reduction in orders from, a single key customer could have a material adverse effect on revenue.
Technological Obsolescence: The pace of technological change is relentless. Synaptics must continuously invest in R&D to maintain its leadership. A failure to adapt to new standards could render its products obsolete.
Valuation
We determined a fair value for Synaptics' equity by applying a forward EV/EBITDA multiple based on a peer analysis.
Table 1: Comparable Analysis
| Name | Market Cap (B) | 1Yr Sales GR | EV/EBITDA Forward |
|---|---|---|---|
| Cirrus Logic, Inc. | $6.2 | 6.0% | 14.0 |
| Himax Technologies | $1.5 | -4.1% | 17.3 |
| Qorvo, Inc. | $8.5 | -1.3% | 19.3 |
| NXP | $56.5 | -4.5% | 16.0 |
| Rambus Inc. | $11.0 | 19.6% | 35.0 |
| Average | $16.7 | 3.1% | 19.6 |
| Median | $8.5 | -1.3% | 16.1 |
| Synaptics | $2.7 | 12.0% | 15.0 |
We forecast the company will achieve $260 million in EBITDA by year-end 2028. Applying a 16.0x target multiple (based on the peer median) results in an enterprise value of $4,153 million. After adjusting for the company's net cash position, the implied 3-year equity value is $4,422 million, or $114.26 per share. To find its present value, we discounted this price to September 2026 using a 9.3% cost of equity, resulting in a final price target of $95.64.
Target Multiple: 16.0x
2028E EBITDA: $260M
Implied Enterprise Value (EV): $4,153M
3-Year Price Target (2028): $114.26
Discounted 1-Year Price Target: $95.64
This suggests a 39.7% upside from the current share price of $68.45.