You could say being an entrepreneur was almost destiny for Thibaud Hug de Larauze, who grew up in a family of them. His father, grandfather and two brothers are all entrepreneurs, so talk about building a business was ordinary dinner conversation. What’s not so ordinary is that Hug de Lauraze heads France’s most valuable startup – a company formed in 2014 and now worth more than $5.7 billion, based on a recent funding round of $510 million. Overall, the company, Back Market has attracted more than $1b in VC investment.
Valeo is an automotive Tier 1 parts supplier to global automotive OEMs. Headquartered in France and listed on the Paris Stock Exchange (FR.PA), it generates ~$20B in annual sales, and employs 110,000 employees in 33 countries and 187 geographical locations. Key areas of focus include ADAS (Advanced Driver Assistance Systems) and intuitive driving for which sensors, electronic controls and data intelligence play key roles. LiDAR is an important element of this portfolio.
While the world has changed a lot over the last couple years, the annual Consumer Electronics Show (CES) remains a reliable, must tune-in event for tech analysts and enthusiasts worldwide. After so many industry events forced to go virtual during the pandemic (including CES 2021), I was thrilled to be able to attend CES 2022 live and in-person. Especially in the realm of consumer electronics, virtual demonstrations simply cannot replicate the experience of being there in the room, seeing the latest gadgets up close and personal.
Electronics refurbishing giant Back Market has raised a massive $510 million series E funding round at a $5.7 billion valuation, the company will announce tomorrow. This comes just eight months after raising $335 million in May 2021.
Apparently there’s big money in reselling used electronics.
In fact, according to Scott Luton, the founder and host of Supply Chain Now, the “recommerce market” is worth an estimated $40 billion a year, and is expected to double in the coming years.
In 2019, a Pew Research Center survey found that nearly 80% of U.S. adults were “somewhat” or “very” concerned about how companies used their personal digital data. In addition, new trust issues and lack of consumer confidence have arisen with the onset of the Covid-19 pandemic in 2020 and the surge in the adoption of online services. These trends are worrying for polling and market research firms that rely heavily on gaining people’s trust.
Smart screens are emerging as an exciting new segment in consumer and enterprise computing. Enabled by new technology innovations in areas such as AI, wireless connectivity, touch, video processing and display drivers, humble screen interfaces are evolving into multifunctional control points that offer lightweight, flexible computing — local and tethered — with increased security and more intuitive and efficient ways to interact with a wider range of devices.
Lumotive recently announced Sam Heidari as its next CEO as the company transitions its proprietary Light Control Metasurface (LCM) technology into products serving the industrial market. Dr. Heidari is a seasoned semiconductor executive who has led companies like Quantenna Communications, helping it scale in revenues and products over the 2011-2019 time-frame. Quantenna was sold to ON Semiconductors (ON) in 2019 for $1.1B, with 2018 annual revenues of $220M.
While I am not a financial analyst, as a tech analyst, I make a habit of tuning into many tech companies’ quarterly earnings reports. It really is “ground truth” for companies as they’re under the scrutiny of the SEC and investors. I make myself available for comments and questions from the media, but it’s rare that I feel moved enough to write an entire column on a company’s quarter. That said, Synaptics’ Q4-2021 earnings report was special enough to warrant a more in-depth analysis in my opinion. The company is really the bellwether high-end for IoT and I had the chance to chat with Synaptics CEO Michael Hurlston to get a deeper dive.
Background
To make sense of the company’s latest financials, it’s worth looking at Synaptics’ journey since its 1986 founding. Though the company originally distinguished itself as a manufacturer of computer trackpads, fingerprint readers and other biometric interfaces, its purview has expanded dramatically to include the likes of the IoT, mobile and automotive sectors. Amongst other things, it now builds touch controllers for car console displays, audio processors, neural network accelerators and video interfaces.
The company found itself floundering in the late 2010s, from an operational and market standpoint, trading below its value and struggling with its gross margins. I believe Synaptics has done a good job of refocusing under the recent leadership of Hurlston, developing product roadmaps and streamlining its portfolio to take full advantage of its impressive library of IP. Synaptics has even revamped its logo over the last few years, in case you hadn’t noticed.
Last year, Covid-19 created a chip shortage that the world has yet to recover from. Demand for electronics surged as entire communities were forced to work and study from home. The shortage was first felt most acutely by the automobile industry, but has also created some disruption in the consumer electronics industry—forcing Apple to stagger its iPhone releases and Samsung to delay the next Galaxy release to 2022.
This has created a lot of conversation about supply chains around the world. In the United States President Joe Biden has focused his efforts on rebuilding the American chip industry—an arduous and complicated task. For now, the shortage is framed as a simple misalignment between supply and demand: The auto industry first canceled their semiconductor orders because they had anticipated a slowdown in business; chip manufacturers found other industries to sell their chips to, and when the auto industry picked up faster than expected they had to go to the back of the line. But there’s more to this story than basic economics.
You Can’t Make Something Out Of Nothing
Producing components for our electronics consumes a lot of natural resources. Let’s start with the nearly 250 different types of materials found in a typical smartphone, many of them mined at the beginning of the cycle, and recklessly disposed of at the end (not to mention the human toll caused by the injustices of the mineral extraction business). Then there’s the power and water that today’s chip mega-factories require to churn out these devices. A typical semiconductor fab requires 2 to 9 million gallons of water per day and uses enough electricity to power 50,000 homes.
That type of consumption has a profound impact on the Earth and the people that depend on it. Just ask the rice farmers in Taiwan. Taiwan is the epicenter of semiconductor manufacturing and it also happens to be in the middle of a drought, causing the country to go to great lengths to keep water flowing to its all-important semiconductor industry and shutting off irrigation to legions of rice growers. While the farmers were compensated for the disruption, they couldn’t put food in people’s hands. It’s also worth noting that the world largest contract chip maker TSMC, consumes nearly 5% of the total power produced in Taiwan, a percentage that will only grow as more factories come on line.
Up almost 3x from its low in March 2020, at the current price of $137 per share, we believe Synaptics Incorporated stock (NASDAQ: SYNA) has further upside potential. Synaptics, a human interface hardware and software developer, has seen its stock rise from $47 to $137 off its March 2020 low, much more than the S&P which increased by over 85% from its lows. Further, the stock is up around 70% from the level it was at before the pandemic. However, we believe that Synaptics stock could rise around 10% to set fresh highs above $150, driven by expectations of steady demand growth and strong Q3 2021 results. Our dashboard What Factors Drove 269% Change In Synaptics Stock Between 2018 And Now? has the underlying numbers behind our thinking.
Synaptics stock’s rise since late 2018 came despite a 21% drop in revenues from $1.63 billion in FY 2018 to $1.29 billion in FY 2020 (Synaptics’ fiscal year ends in June). Combined with a 3.5% rise in the outstanding share count, RPS (revenue-per-share) dropped 24% from $47.70 to $36.40 over this period.
However, Synaptics’ P/S (price-to-sales) multiple rose from 0.8x in 2018 to 2.5x by 2020 end, and has further risen to 3.8x currently. We believe that the company’s P/S ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.
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