Analysts Debate Whether Broadcom Hint Of Lost Apple Business Means Synaptics Win

Shares of Synaptics (SYNA) are higher in afternoon trading after rival Broadcom (AVGO) disclosed the loss of a "mixed signal custom product" from its largest customer, which is Apple (AAPL). While an analyst at Susquehanna thinks Synaptics could be a beneficiary, his peer at Rosenblatt said he does not believe that Synaptics won the Apple business.

BACKGROUND: Broadcom, on its fourth-quarter earnings conference call on Thursday, disclosed that its mixed-signal custom product line, which was approximately $1.1B in fiscal 2019, is expected to drop to less than $500M in fiscal 2020. The company said the reduction in revenues is "driven by a change in architecture and our primary smartphone customer," as well as its decision to reduce its investment in this area in order to focus its engineering resources on "more sustainable and profitable activities" in its core semi business.

SUSQUEHANNA BOOSTS SYNAPTICS' TARGET: After Broadcom disclosed the loss of a mixed-signal custom product from its "largest customer," namely Apple, Susquehanna analyst Christopher Rolland raised his price target for Synaptics to $60 from $46 while maintaining a Neutral rating on the shares. While this could mean wireless charging, the analyst thinks it is more likely the touch controller, adding that it is rumored that Apple is attempting to move to flexible OLED displays in its next-generation iPhones. Rolland contended that this "ties in well" with Synaptics' commentary about a recent win at Huawei and the challenges the company is "uniquely" able to address with its latest touch controllers, contends the analyst. However, the analyst admitted that he is "a bit surprised and confused" by Broadcom's $600M detrimental revenue suggestion and sees this as "$200M incremental for Synaptics tops."

PROBABLY NOT SYNAPTICS: On the other hand, Jun Zhang, Rolland's peer at Rosenblatt, said he does not believe that Synaptics won the business that is apparently being lost by Broadcom. Zhang also added that he thinks Broadcom lost its touch controller business at Apple for 2020 to Samsung's (SSNLF) Y-OCTA, or "on-cell touch AMOLED," product.

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