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RBC raises TD Synnex shares target on AI-driven demand

EditorEmilio Ghigini
Published 11/06/2024, 11:38
SNX
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On Tuesday, RBC Capital adjusted its outlook on TD Synnex (NYSE: SNX) shares, increasing the price target to $135 from $118 while maintaining a Sector Perform rating. The revision comes amid expectations of market stabilization and growth acceleration in the second half of 2024.

The firm cited several factors contributing to the more favorable outlook for TD Synnex, including a stabilization in PC markets, easier comparisons within its Assembly Solutions (AS) segment, and an increase in demand for AI-enabled workloads and applications. These elements are anticipated to boost billing growth to a mid-single to high-single digit rate later this year.

Despite a potential mix shift that could pressure margins, RBC Capital anticipates that this will be partially mitigated by the continued expansion in strategic technology areas and the possibility of cost reduction initiatives. The firm recognizes the company's strong business momentum, which has been partly fueled by the tailwinds of artificial intelligence.

The analyst also highlighted TD Synnex's attractive free cash flow yield and its shareholder-friendly capital allocation priorities. With these considerations in mind, the price target reflects a 7x multiple of the forecasted FY25 enterprise value to EBITDA ratio, which aligns with the company's five-year average.

In other recent news, TD SYNNEX (NYSE:SNX) Corp. has been the subject of several significant developments. The company announced the sudden departure of two board members, Robert Kalsow-Ramos and Matthew Nord, both affiliated with Apollo Global Management (NYSE:APO), Inc. The company stated that their resignations were not due to any disagreements with TD SYNNEX, and plans to fill the vacancies have not yet been disclosed.

TD SYNNEX has also been in the spotlight due to a series of secondary public offerings of its common stock. The offerings, which involve shares owned by entities managed by Apollo Global Management, Inc., have been upsized and include a share repurchase initiative as part of the company's ongoing share repurchase program.

Adding to the company's recent activities, UBS upgraded TD SYNNEX's stock from Neutral to Buy, raising the price target to $145 from the previous $115. UBS anticipates accelerated growth for the company in fiscal years 2024 and 2025, driven by expected demand for IT and AI technology, and a capital allocation strategy aimed at returning at least 50% of cash flow to shareholders. The firm's forecast includes a projected earnings per share (EPS) of $13.16 for fiscal year 2025.

InvestingPro Insights

Following RBC Capital's revised outlook on TD Synnex, the InvestingPro platform offers additional insights that align with the company's current trajectory. TD Synnex's aggressive share buyback strategy is a strong signal of management's confidence in the company's value, as indicated by InvestingPro Tips. Additionally, the company's consistent dividend growth, with dividends raised for three consecutive years and maintained payments for 11 consecutive years, underscores its commitment to shareholder returns.

InvestingPro Data highlights a market capitalization of $11.15 billion and a P/E ratio that has adjusted to a more attractive 14.21 from the current 19. Moreover, the company's strong free cash flow yield is reflected in its valuation, which implies robust free cash flow generation. These metrics, combined with a low price volatility, suggest that TD Synnex could be an appealing option for investors looking for stability and consistent yield.

For those interested in deeper analysis, InvestingPro offers additional tips on TD Synnex, which can be accessed at https://www.investing.com/pro/SNX. Readers can take advantage of these insights and more by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 17 additional InvestingPro Tips available, investors can gain a comprehensive understanding of TD Synnex's potential and position in the Electronic Equipment, Instruments & Components industry.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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