Synchronoss (SNCR) – Description:
Synchronoss is a world leader in cloud solutions and software-based activation serving communication service. Its solutions allow customers to connect and synchronize devices that empower fast data transfer. Founded in December 2000, Synchronoss (SNCR) is headquartered in Bridgewater, NJ, United States, and employs about 1,300 people. In recent quarters, the company has executed a fairly aggressive growth strategy by undertaking a number of acquisitions.
Synchronoss exploits more than 100 seminal patents, and has one of the largest, most comprehensive technology platforms in production; one that is widely used by the largest service providers and more than 2 billion mobile subscribers globally. Its services are of particular interest in relation to the IoT applications, which include: automatic subscriber activations; order management; upgrades; and connectivity and content management in a many-to-many service channel environment such as 2G, 3G, and 4G services, LTE and WiMax, WAN, IPTV in addition to other device types and content transfer possibilities.
Investment case:
Synchronoss’ IoT value chain consists of 8 segments: Radios (connectivity), Sensors (measurements), Microcontrollers (processors/storages), Platform providers (monitoring), Application Software (reporting), Devices (end user applications), Airtime (transport of communication) and Services (deploying, management and support) to IoT solution providers). Synchronoss, being an enhanced platform software provider, is also able to provide the IoT business segment with storage volume, e-management and billing capabilities through its software. Hence, it creates solutions with multiple layers and functionalities in a vertically integrated fashion.
The company has been a leader in automating device activation processes at wireless and cable companies since 2001. As consumer companies look to sell devices that are connected to their network, such as wearable devices, e.g. watches, fitness and health products, GPS, mapping and traffic information, etc., Synchronoss’ products will allow end-providers to activate required services through an automated process, thereby helping to control their costs. This service is provided at a very small unit cost; and the benefit of such product is that the providing company can scale-up to offer the service to the multi-billion unit market for connected devices.
Synchronoss’ shares presently trade with a PE01 of 21.5 times and a PE02 of 17.88 times, which is quite attractive given the business segment. The stock is covered by 13 analysts, 10 of which have rated the stock as a strong buy – with a target price in the region of USD 50. This represents an upside potential of over 45 percent for the next 12 months.
Strengths and weaknesses analysis / Fundamental analysis:
Strengths:
- SNCR holds multiple patents covering its business prospects for the short to medium term,
- SCNR excels in the IoT, which is expected to generate a device market in the region of 26 billion pieces by 2020,
- The IoT market is anticipated to grow by between 15 to 30% over the next decade,
- The company’s software service addresses multiple business layers.
Weaknesses:
- SNCR is active in a relatively new business segment with significant and frequently occurring changes, hence the successful development of the business is not necessarily a given,
- The IoT business is not one market but rather a series of vertical markets,
- The development of the IoT business will not be gradual and smooth, but rather irregular and in different waves. SNCR’s present technological lead may not be sufficient to capture the next generation of business development.
Company profile, investment opportunity and asset management integration:
| Metric | Rating |
| Operational risks: | Above average |
| Expected growth: | Well above average |
| Long term value creation: | Well above average |
| Positive competitive advantage: | Above average |
| Management excellence: | Average |
| Financial strength: | Average |
| Investment orientation: | Group “Best-in-Class”: Technology, IoT |
Price ranges:
| Buy: | Only forcustomers |
| Sell | Only forcustomers |
| Stop-loss: | Only forcustomers |
| Fair-value: | Only forcustomers |