Biometrics stocks this week: Synaptics, NXT-ID, Suprema
Shares in Synaptics were rising this week in the wake of a report from Japanese investment bank Mizuho upgrading the rating on the stock to a ‘buy’. The analyst also increased the target price on shares to $55 from $42 on expectations that sales are headed up in the second half of this year.
The upgrade represents a turnaround in opinion on the company. It was only a year and a half ago that the same analyst cut the rating on shares of Synaptics and reduced the target price.
Why the shift in sentiment?
Part of the story has to do with Synaptics next generation in-screen fingerprint reader. The company pioneered a technology that allows bevel-less and button free fingerprint sensing. The company’s product, Clear ID, sees a simple fingerprint icon on the display allowing users to log in.
The product represents the next step in smartphone-based fingerprint-enabled biometrics. Many thought Clear ID would be on the market in 2017 and was expected to anchor several new smartphone products last year. But the product didn’t quite make it across the finish line in time.
As is now well-known in the industry the Samsung Galaxy S8 went to market with a proprietary screen and an older style button-based fingerprint sensor awkwardly installed on the back of the device. Apple decided to go with a face-based biometric system for the iPhoneX. The stock price of Synaptics took a hit, falling 15% over the twelve months.
But now, several months on, the technology is finally coming to market. Earlier this year Vivo and Synaptics introduced the first phone to utilize Clear-ID at CES 2018. That product is now selling in China. More recently it was announced that another Vivo phone, the X21 UD, will be the second-generation smartphone featuring Clear ID. The product initially late to market is finally shipping. That’s going to generate sales this year. No wonder analysts are upping their ratings.
Sure, competitors like Focaltech, Novatek, Egistec and Goodix are beginning to nibble at the market share of Synaptics. But the company’s products are still the premium choice in the category, and that means the year ahead looks good for Synaptics. As it is, an advance to $55 a share would represent a gain of 25% from the current stock price. Also reported this week is news that several big investment funds are picking up shares in Synaptics. Securities and Exchange Commission filings indicated that Guggenheim Capital LLC upped its stake in Synaptics by 140% during the fourth quarter. (Guggenheim Partners is a global investment firm with more than $305 billion in assets under management and was founded by the great-great grandson of the guy who founded the famous museum). Other funds that upped their stake in Synaptics over the last two quarters include Legal & General Group Plc, Profit Investment Management LLC, Profund Advisors LLC and Wells Fargo & Company MN (among others).
The CEO of NXT-ID this week dropped a juicy hint about a new product the company is developing. Gino Pereiro was interviewed by a trade magazine in the payments industry. He said the company is creating an “eVault” that will store everything that a wallet does, from payment cards to photo IDs and membership cards. Pereiro said he expects the device to be about the size of “five credit cards stacked on top of each other.” Nicknamed “Hendricks” the next-gen device will utilize fingerprint-based biometrics to guard access. It will rely on near-field communications to conduct contactless payments and will store store 10 to 15 payment cards.
Pereira said in the interview that the company had previously worked on a similar device. But the technology just wasn’t ready. Since then, of course, NXT-ID has bought up the contactless payment device maker FitPay. It seems that acquisition is allowing this device to go ahead. Shares in NXT-ID were trading around USD $1.97 this week.
An interesting story in the investment trade press this week notes that a class action lawsuit has been filed against Facebook on the part of users who are said to be “upset” about how it is the company has begun using photo-scanning technology in conjunction with biometric face ID. The suit claims the face ID technology is in violation of an Illinois law that prohibits companies from keeping biometric data without users consent (many biometrics-based lawsuits are coming to court in that state). A federal judge this week is said to have allowed the suit to go ahead.
The suit comes at the same time Facebook’s CEO Mark Zuckerberg was called to testify before the U.S. Congress and Senate about what Facebook does with all the data it collects. Arguably legislators should have also called in Google and asked them that question as well. But it seems that neither the court case nor the testimony have been enough to scare off investors. A media report of the lawsuit goes on to note that the world’s largest asset manager, BlackRock, recently increased its stake in Facebook through its massive Global Allocation Fund, which has made Facebook one of its top ten holdings. Facebook shares have traded down of late as many investors cash out of the stock. But others, like BlackRock, think the current issues are short-term and are buying on the dip.
The Korean biometrics company Suprema launched a new product this week. The BioLite N2 is an access control and time attendance terminal built for rugged outdoor conditions. The world saw how cold it can get in Korea during the recent winter Olympics. So maybe it make sense that Suprema is coming to market with a fingerprint sensor that can operate in a temperature range from -20 to 50 degrees Celsius.
The company also claims that the sensor delivers a new level of accuracy in cases where the users skin is dry (a particular concern in the winter season when humidity plunges). According to Suprema the terminal yields up to “five times greater accuracy” on dry skin or under cold weather conditions other units. Suprema trades on the Korean NASDAQ and is a formidable player in the sector. Founded in 2000 the company’s revenue enjoyed an astounding compound average growth rate of 38% annually between 2006 and 2014. Shares in Suprema are priced in the Korean Won and were trading this week at about KRW 5,900 this week.
Another interesting story from the week that was: A Chinese company called SenseTime raised a massive $600 million from the Chinese online trading portal, Alibaba. According to a report on business news service Bloomberg that gives the company a total valuation of $3 billion making it the world’s “most valuable AI startup.”
The company also makes use of biometrics to monitor some of China’s more than 600 hundred million security cameras. The recent investment is part of a growing flood of venture capital sloshing around the Chinese tech market these days. Commonly cited stats are that private equity and venture capital investments grew from $14 billion in just 2012 to $120 billion this past year. That’s huge growth in tech financing. There are now at least 34 Chinese startups valued at more than $1 billion. This is second only to the U.S. now. And while a lot of that money comes from the bigger Chinese tech companies like Baidu, Alibaba and Tencent (the so-called BAT stocks, comparably to the FANG stocks in America), the cash is also coming from the Chinese Communist Party. According to reports the country is asserting a higher degree of national control over its tech sector as it explodes in size. Communist Party committees are said to have been set up at many firms and are reviewing compliance with “national goals.” Regulators have discussed taking equity stakes in the BATs (along with a seat on the board). Perhaps the most amazing stat coming out of the company’s burgeoning tech sector: There are said to be more than 1,000 government-owned venture capital firms in the country.