SYNA: Upside Even without a ‘Galaxy S IV’ Win, Says Pac Crest

Pacific Crest chip analyst John Vinh today raised his rating on shares of touch-sensor controller maker Synaptics (SYNA) to Outperform, and set a $40 price target, writing that the company has made “impressive” gains in the smartphone and tablet market, including in tablet products from Samsung Electronics (005930KS), which could even lead to further upside if Synaptics winds up in a future “Galaxy S4” smartphone, he thinks.

Synaptics is probably in forthcoming phones from Research in Motion (RIMM) and Google’s (GOOG) Motorola unit, Vinh thinks, which means the company is in all the phones that counts, outside of Samsung’s phones and Apple‘s (AAPL)iPhone:

Our research indicates that Synaptics has won flagship smartphone designs at RIM and Motorola/Google in 2013. This will give the company a dominant position at every major OEM,
including LG, HTC, RIM, Nokia, Motorola/Google and Sony, leaving only Apple and Samsung
(which is yet to be determined). We believe Synaptics has secured these wins through superior
performance on its latest-generation ClearPad touch controller solutions. Feedback from the
supply chain indicates that Synaptics provides one of the thinnest one-glass solution touch
module stack-up in the industry. As OEMs strive to create thinner smartphone form factors and
keep pace with Apple, we believe this becomes an increasingly important criteria.

In addition to “strong demand” for Samsung’s Galaxy Tab 2 tablet, featuring the company’s chip, there’s a prospect Synaptics could be designed into the next version of Samsung’s Galaxy line of smartphones, though the company doesn’t need that win to do well, he thinks:

Despite improving sentiment, winning the Galaxy S4 would still represent significant upside to estimates and expectations in our opinion. We believe most investors believe Atmel (ATML), has won the Galaxy S4, as ATML�s performance is up almost 40% since speculation began regarding the Galaxy S4. During the same period, SYNA�s performance is only up 16% and has only outperformed the SOXX by 8% [...]� While investors have been heavily focused on the Samsung Galaxy S4 opportunity, we still believe that Synaptics will continue to gain share at Samsung and expect Synaptics to ramp several additional smartphone designs in 2013. We also continue to believe strong demand for Samsung�s Galaxy Tab 2 tablet to be a positive tailwind for the company. We previously noted that we expect Samsung to ship five million Galaxy Tab 2 units in Q4 on increasingly strong demand trends.

Synaptics shares today rose $1.62, or 5%, to $32.14.