Tuesday, UBS upgraded TD Synnex (NYSE:SNX) stock from Neutral to Buy, with a new price target of $145, up from the previous $115. The firm anticipates an acceleration of growth for the company in fiscal years 2024 and 2025, which they believe is not currently reflected in the market price.
The upgrade is based on the expected demand for IT and AI technology, alongside a capital allocation strategy that aims to return at least 50% of cash flow to shareholders through dividends and buybacks. UBS suggests that this approach, combined with the resolution of the Apollo share overhang and the implementation of a $2 billion buyback authorization, could lead to a re-evaluation of TD Synnex shares.
TD Synnex is expected to benefit from a general rebound in IT spending and additional demand from AI, which could elevate revenue growth to around 6% in fiscal years 2025 and 2026. This growth rate is significantly higher than what is currently anticipated by the market.
The firm's forecast includes a projected earnings per share (EPS) of $13.16 for fiscal year 2025. UBS expects that the combination of faster growth and an attractive capital return strategy will result in a re-rating of the company's price-to-earnings (P/E) multiple to 11.0x, up from the current 9.5x.
InvestingPro Insights
TD Synnex's (NYSE:SNX) recent performance and strategic moves have caught the eye of analysts and investors alike. With a market capitalization of $9.54 billion and a price-to-earnings (P/E) ratio standing at 16.13, the company's valuation paints an interesting picture. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 is even more appealing at 12.15, suggesting a potential undervaluation compared to historical standards.
The company's commitment to shareholder returns is evident, as reflected in two key InvestingPro Tips: TD Synnex has been aggressively buying back shares and boasts a high shareholder yield. Additionally, the company has raised its dividend for three consecutive years, showcasing a balance between reinvesting for growth and rewarding shareholders. With a dividend yield of 1.37% and a robust dividend growth rate of 14.29% in the last twelve months as of Q1 2024, TD Synnex is positioning itself as a compelling choice for income-focused investors.
Moreover, the stock has demonstrated strong returns, with a one-month price total return of 12.86% and a one-year price total return of 25.27%, indicating robust short-term and long-term performance. This aligns with UBS's optimistic outlook for the company's growth and capital allocation strategy. For investors seeking further insights, there are over 15 additional InvestingPro Tips available, which can be accessed on the platform. To delve deeper into TD Synnex's prospects and unlock comprehensive analytics, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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