by Investment U Research Team
Wednesday, December 9, 2009
It’s hard not to like a company that makes user-friendly devices.
Enter Synaptics, Inc. (Nasdaq: SYNA), the leading developer of human interface solutions for mobile computing, communications and entertainment devices, focusing primarily on innovative touchscreen technology.
From notebook PCs to PC peripherals, digital music players to mobile phones, and GPS devises to remote controls, the company gains more groupies every time it produces a new device.
And with the products it plans to roll out over the next two years – combined with current investor sentiment – Synaptics’ shares looked primed for a run.
The Ingredients for Success
To give you an idea of how big the touchscreen technology market is, consider this…
- Of the 34 million smartphones owned in America, 70% of them have touchscreen capabilities.
- Overall mobile phone sales surged by 159% in 2008.
- Due to breakthroughs in 4G broadband technologies, we’ll see many new hi-tech gadgets in the next two years.
The common denominator here is that Synaptics’ innovative touchscreen technology easily capitalizes on all these trends, which bodes well for the company’s future revenue.
Sure, last year Apple (Nasdaq: AAPL) sold an entire third of touchscreen smartphones. But since then, Synaptics has integrated itself into handsets sold by Research in Motion (Nasdaq: RIMM), Google (Nasdaq: GOOG), LG Electronics (LSE: LGLD), Nokia (NYSE: NOK), Sprint (NYSE: S) and T-Mobile.
And Synaptics could still get a jump on Apple, because while iPhone users can quickly scan through pictures, or mimic Yoda by fighting with a digital light saber with the touch of a finger, Synaptics knows exactly how to top that.
The Multi-Finger Solution
Why use one finger when you can use all of them? Synaptics recognizes that working with only one finger can get tedious, so it introduced the advanced, multi-touch ClearPad 3000 series. This offers touch-sense technology and high-resolution touchscreens with advanced multi-finger capability.
What’s more, ClearPad 3000 is already ready for the next generation of 3D graphical user interfaces, with 48 sensing channels and advanced power management that allows for up to an 8-inch screen, more accurate sensing and lower power consumption.
It allows users to “crumple” virtual paper, play a virtual piano with both hands and dual against a friend on the same phone.
And while it’s too expensive to mass-produce right now, it’s already generated enough buzz that it shouldn’t be long before consumers have access to it.
So what about Synaptics shares?
With that potential, you might wonder why investors have shorted 63% of Synaptics’ outstanding shares. So far, they’re wrong, as the stock hasn’t dropped.
That’s good news for more bullish investors, as short sellers will have to buy shares if the stock rises, in order to cover their positions and cut their losses. This would push the stock higher and could trigger more momentum-type buying.
In addition, the potential of Synaptics’ 4G platform should lift the stock. Over the longer-term, we believe it could bounce from its current price of $27 all the way up to $40 or more in the next 18 months.