Synaptics Acquires DSP Group, Raises Q2 Guidance

Hardware company Synaptics Incorporated (SYNA) has successfully acquired DSP Group in an all-cash deal worth about $549 million. The transaction was initially announced on August 30, 2021.

DSP Group provides voice processing and wireless chipset solutions on a global level.

The deal was financed with the proceeds from a new 7-year $600 million senior secured term loan issued under the company’s existing credit facility. (See Synaptics stock charts on TipRanks)

The President and CEO of Synaptics, Michael Hurlston, “DSP Group’s capabilities in SmartVoice and low power AI align well with our long-term vision of embedding more intelligence in connected devices at the edge of a network. Further, the addition of DSP Group’s ULE wireless technology and VOIP processing solutions enhances our ability to both cross-sell and deliver differentiated solutions to our combined customer base.”

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Updated Outlook

On expectations of the acquisition being immediately accretive to its adjusted EPS, Synaptics has raised guidance for the second quarter of fiscal 2022.

Revenue is expected to be in the range of $410 million to $430 million, up from $390 million to $420 million previously expected. Also, adjusted EPS is likely to be between $3 to $3.20, up from the prior guidance of $2.90 to $3.20.

Stock Rating

Recently, KeyBanc analyst John Vinh maintained a Buy rating on Synaptics and raised the price target to $310 from $270. The new price target implies 8.4% upside potential from current level.

Overall, the Street is bullish on the stock and has a Strong Buy consensus rating based on 10 Buys and 1 Hold. The average Synaptics price target of $270.50 implies downside potential of about 5.4% from current levels.

Smart Score

SYNA scores a 9 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.

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