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Why Synaptics Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Synaptics (NASDAQ: SYNA  ) plummeted more than 15% Friday after the company provided disappointing guidance following its solid fiscal first-quarter 2014 earnings report.

So what: Quarterly net revenue rose a whopping 75% year over year to $222.6 million, which translated to an adjusted net income of $45.9 million, or $1.31 per diluted share. For reference, both numbers beat analysts' expectations, which called for adjusted earnings of $1.23 per share on sales of $218.89 million.

However, Synaptics also stated that next quarter's revenue is expected to fall to the range of $192 million to $208 million, or well below average expectations for fiscal second-quarter sales of $209.35 million.

Now what: That's still an increase of 34% to 45% over last year's fiscal second quarter, but nervous investors certainly don't like to see year-over-year growth wane on any level. Even so, with shares currently trading at just 15.5 times last year's earnings, and 11.3 times next year's estimates, I think there's plenty of pessimism already priced into Synaptics stock. As a result, today's pullback could very well serve as a fantastic buying opportunity for patient long-term investors.

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9/28/2016 4:00 PM
SYNA $58.68 Up +0.53 +0.91%
Synaptics CAPS Rating: ****