Shares of a software company Synaptics (SYNA.US), are trading up nearly 14% today as earnings and revenue in its first fiscal quarter (Q3 2023) beat Wall Street expectations. Also CEO remarks supported bulls.
- The company reported a net loss of $55.6 million versus a net profit of $64.6 million in Q3 2022. EBIT per share was $0.52 versus analysts' forecasts of $0.38. Revenue fell 61% y/y to $237.7 million, but came in above forecasts of $230 million.
- The market reacted optimistically not so much to the report itself, but to comments from CEO Michael Hurlston, who conveyed on a conference call that there was strong evidence that trends for the company would soon radically reverse supporting the growth of its business. Synaptics increased revenue on a sequential basis for the first time in more than a year. Hurlston pointed out that management 'is beginning to see stabilization in the business and expects a recovery in 2024, while the company continues to be impacted by excess customer inventory.'
- Also, Synaptics CFO Dean Butler indicated that investors should be pleased that the company's sales are likely to remain flat on a k/k basis in the current quarter. He assessed the company's balance sheet as 'in great shape' and pointed out that the company is, contrary to many comments, able to survive even very difficult macro conditions and continues to generate positive cash flow.
- Analysts at Constellation Research pointed out that higher profits and revenues may have impressed investors, but the company is clearly experiencing a period of weakness due to a slump in PC sales. All this, with stocks still high, has caused the company to stop generating a net profit and is now recording losses. It seems that if Synaptics had cut costs, net profit would have quickly returned, but while the company has failed to do so, Constellation sees the prospect for improved results in future quarters and on an annual basis where Synaptics can also support the 'low base effect'.
- Synaptics is targeting fiscal Q2 (Q4 2023) revenue in the $220 million to $250 million range, so the chance to beat Wall Street's $240 million forecast still exists.
Synaptics (SYNA.US) shares are breaking out above the SMA200 average (red line) today. Source: xStation5
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