Synaptics Is A Good Proxy For Investing In Samsung

Apr 28 2014, 4:04pm CDT | by

Samsung and Apple (AAPL) are the top two players in the smartphone market.  I am often asked by  individual investors in the U. S. how to invest in Samsung, a Korean company.  The best way is to buy Samsung shares in Seoul, South Korea or GDRs in London.

In the United States, Samsung shares trade under the symbol SSNLF. These are unsponsored ADRs trading on the OTC market. They have very wide bid-ask spreads, and average volume over the last three months is 10 shares per day. On most days not a single share trades.  Given these huge liquidity issues, SSNLF should be avoided by all but the most experienced investors.

A good way to profit from Apple’s success has always been buying select suppliers to Apple.  However this strategy does not work well with Samsung.  Unlike Apple, Samsung itself is one of the largest manufacturers of semiconductors, display screens, and other components that go into smartphones. Until recently, Samsung was manufacturing the CPU, which is the brain of the smartphone, for Apple iPhones.

Synaptics, a San Jose, California-based supplier of human interface solutions mostly for touch applications, is a good way to profit from the success of Samsung smartphones.  Synaptics trades under the symbol SYNA on Nasdaq.  Average volume over the last three months is 1.38 million shares per day.  Bid and ask spread is not as narrow as desirable but it is typically manageable as it tends to fluctuate between $0.02 and $0.20.

Solutions from Synaptics are used to enable a number of features in Samsung’s flagship smartphone Galaxy S5.  These solutions include the finger print sensor in the home button that enables the PayPal payment app, stylus technology with sensitivity as high as one millimeter, and 3D touch capability that makes it possible to hover a finger over the touch screen to scroll and make selections.

Synaptics also played a major role in the popular Samsung Galaxy S4, and it is a supplier to the Samsung Galaxy TabPro 8.4.  Synaptics’ business is firing on all cylinders.  At the beginning of the fiscal year, Synaptics projected annual revenue growth of 21%.  Due to the strength of finger print ID business, now the company is projecting a growth rate closer to 40%.  March quarter revenues increased 25% year over year.  More importantly, revenue for mobile products increased 44% year over year.

Synaptics entered the June quarter with a backlog of $145 million and expects revenues for the quarter to be in the range of $275 to $295 million.  The company expects gross margins to be 45% to 46%.  Non-GAAP net earnings per diluted share for the June quarter are projected to be $1.10 to $1.32 per share. Analysts’ estimates for the next year earnings range from $3.54 to $5.23 compared to $3.47 to $4.08 for this year.  Assuming $5 of earnings, and revenue growth potential of 40%, the stock has considerable room to run.  If the stock attains a P/E of 20, the stock can go over $100.  As of this writing the stock is trading around $60

It is important to note that this stock is highly volatile. Two reasons behind the high volatility are that short interest periodically spikes and there is a high variance in earnings estimates.  Today the stock is down along with other growth stocks for no particular reason specific to this stock.  Astute investors can take advantage of the volatility by slowly scaling in on dips.

Samsung Unveils The Galaxy S5 And Gear 2

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Shift work can worsen asthma, pneumonia
London, July 28 (IANS) A research has found that drugs widely used to treat lung diseases like asthma or pneumonia work better with the body clock.
 
 
Decoded: What triggers sexual arousal in you
New York, July 28 (IANS) Know why just looking at an attractive face stimulates sexual arousal? Well, it takes two to tango!
 
 
Turn your selfie into emoji with this app
New York, July 28 (IANS) Tired of seeing the same yellow-faced smileys? In an age of selfies, how can emojis be far behind?
 
 
Lenovo to take on Google Glass
New York, July 28 (IANS) Lenovo is developing a wearable smart glass similar to Google Glass with an external battery to be worn on the neck.
 
 
 

Latest from the Network

Scoreboard: India vs England, day 2, third Test
Southampton, July 29 (IANS) The following is the scoreboard after the second day's play of the third cricket Test between India and England at the Rose Bowl here Monday: England (first innings, overnight 247/2)...
Read more on Sport Balla
 
UN call neglects Israel's security needs: Netanyahu
Jerusalem, July 29 (IANS) Israeli Prime Minister Benjamin Netanyahu Monday criticised the UN Security Council's call for ceasefire in the Gaza Strip, saying it strengthens Hamas and neglects Israel's security needs....
Read more on Politics Balla
 
Three dead, 16 injured in Nigerian suicide attacks
Abuja, July 29 (IANS) At least three people were killed and 16 others injured in two suicide bombings Monday in northern Nigeria's Kano state, officials said. In the first incident, a female suicide bomber attacked a...
Read more on Politics Balla
 
31 killed in Iraq violence
Baghdad, July 28 (IANS) At least 31 people were killed and 20 others wounded in the latest violent attacks and conflicts in Iraq, police source said Monday. Police patrols Monday found 14 unidentified bodies - 11 men...
Read more on Politics Balla
 
Narang clinches men's 50m rifle prone silver
Glasgow, July 28 (IANS) Indian shooters continued to bring home more medals as Gagan Narang won the country's third medal Monday clinching the men's 50-metre rifle prone silver in the finals at the Commonwealth Games...
Read more on Sport Balla
 
Renew humanitarian truce in Gaza: UN chief
United Nations, July 28 (IANS) UN Secretary General Ban Ki-moon Monday urged Israel and te Islamist Hamas movement to renew a humanitarian ceasefire in Gaza and called on those responsible to "step back from provoking...
Read more on Politics Balla
 
Indian paddlers lose men's team bronze playoff
Glasgow, July 28 (IANS) India's men paddlers suffered a disappointing finish in the team bronze medal playoff, losing to Nigeria 1-3 at the Commonwealth Games here Monday. India, who had won the bronze in the same...
Read more on Sport Balla
 
Ousted Thai PM faces power-abuse allegation
Bangkok, July 28 (IANS) Thailand's Election Commission (EC) is accusing former prime minister Yingluck Shinawatra of abusing power by using public funds to campaign for elections, local media reported Monday. EC...
Read more on Politics Balla
 
CWG: Ghosal, Anaka lose in squash
Glasgow, July 28 (IANS) Indian squash players Saurav Ghosal and Anaka Alankamony bit the dust Monday bringing to an end their individual campaigns in squash singles at the Commonwealth Games here. While Ghosal lost...
Read more on Sport Balla
 
England 452/5 at tea
Southampton, July 28 (IANS) England were batting at 452/5 at tea on Day 2 of the third cricket Test against India at the Rose Bowl here Monday. Ian Bell and wicketkeeper-batsman Jos Buttler were batting on 133 and 13...
Read more on Sport Balla