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How Synaptics Incorporated Fell 10.3% in April

By Anders Bylund - May 11, 2016 at 12:01PM

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And the month was going so well...

What: Shares of Synaptics (SYNA -0.43%) fell 10.3% in April 2016, according to data from S&P Global Market Intelligence. But before the plunge, the stock was heading for a double-digit gain instead. What happened?

So what: In the middle of April, rumor had it that Chinese investors were planning to take Synaptics private. Shares gained more than 7% that day, building a month-to-date gain of more than 10% that held firm until the very end of the month.

By the time Synaptics reported its third-quarter results, investors were primed to forget about those buyout rumors, of which they had seen no further evidence two weeks later. As it turns out, Q3 was a tough period for the maker of touchpad and fingerprint reader solutions. Sales came in 10% below analyst projections, and earnings were 20% below Wall Street's consensus estimates.

CEO Rick Bergman chalked this up to a "short-term pause" in business growth and product demand. Then he followed up by setting fourth-quarter revenue guidance a heart-stopping 33% below Street projections. And the share prices came tumbling down.

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.

Now what: Synaptics lives and dies by the smartphone and tablet markets, which accounted for 88% of the company's sales in the third quarter. These long-lasting growth markets have been slowing down lately, thanks to a combination of market saturation (everyone has a smartphone already) and a high bar for impressing consumers (what can this year's model do that the last one couldn't?).

Synaptics is hardly alone in suffering from this sudden slowdown. Mobile radio specialist Skyworks Solutions (SWKS 0.06%) took a 14.2% haircut in April, for largely the same reason that Synaptics suffered. Even mighty Apple (AAPL 0.00%) plunged 14%, becoming a catalyst for the whole downtrend.

All three of these stocks are now trading at least 20% below their year-ago prices, and all three are searching for a return of rampant smartphone and tablet sales. Being a bit of a one-trick pony, Synaptics doesn't really have a Plan B -- unless that rumored Chinese takeover comes through.

If not, Synaptics investors are heading into a long, cold winter. Mr. Market doesn't care much for traditional seasons.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$141.66 (0.00%) $0.00
Skyworks Solutions, Inc. Stock Quote
Skyworks Solutions, Inc.
$98.09 (0.06%) $0.06
Synaptics Incorporated Stock Quote
Synaptics Incorporated
$128.22 (-0.43%) $0.56

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