Monday, May 2, 2022

A Small Cap Equity holding: TD SYNNEX (SNX, $101.59): “Not Ready to be Shipped Yet” By: Chris Deneweth, AIM Student at Marquette University


TD SYNNEX (SNX, $101.59): “Not Ready to be Shipped Yet”

By: Chris Deneweth, AIM Student at Marquette University

Disclosure: The AIM Small-Cap Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.


  • TD SYNNEX Corporation. (NYSE: SNX) engages in the distribution, logistics, and integration of technology hardware, software, and services.
  • SNX is now a Rittal channel partner and will begin to distribute Rittal’s products.
  • SNX’s new capital allocation framework.
  • SNX has announced that they have made their long-awaited return to conventions.
  • SNX is expected to beat estimates and have experienced a revenue growth rate of 73.1% LTM.

Key points:

When the stock was pitched in December of 2021, SNX had recently acquired Tech Data. This was a major driver of the stock, as well as a major risk. It was one of the first times that CEO Rich Hume had done an acquisition. As we look back on how Hume and SNX’s C-Suite dealt with this acquisition, we can notice that they knocked it out of the park. The company had a 5-yr CAGR of around 16%. Q4 of 2021 had a YoY growth of 110.6%, with Q1 of 22 posting an even more impressive YoY growth of 213.2%. It is safe to say that SNX’s management team is fit to continue to grow this company to new heights with new partnerships

Announced on April 18, 2022, SNX has partnered with Rittal. Rittal is a global manufacturer and systems solution provider of industrial and IT enclosures. This partnership will be very beneficial, as Rittal now gets a world-class company to help deliver their products, while SNX received more orders to deliver their best-in-class products. This partnership also allows SNX to provide a wider variety of products, so that they can continue to deliver products that are relevant in this ever-changing IT landscape. This partnership will also increase brand recognition for both companies, allowing them to steal market share from their competitors.

In the last two earnings calls, management has been very excited to talk about their new capital allocation framework. This framework is focused around two main objectives. The first objective is to continually increase their dividends paid out. They reinstated their dividend payouts in Feb 2021, with a dividend per share of $.20. They were able to increase their dividend to $.30 per share for Q1 of 22. They plan to continue to grow their dividends year after year. The second objective is to continue to repurchase shares. Their goal for 2022 is to repurchase $100 million in shares. They have already repurchased $25 million in Q1 of 22. This new capital allocation framework will continue to drive the stock price up in the future.

As SNX has slowly started to bring employees back to work, they continue to be very cautious about COVID-19. SNX has not been to a convention in over 2 years. As Tampa Bay’s largest public company, their first convention drew hundreds of in-person vendors and partners. Some of these attendants included people from Microsoft, Google, Intel, and Dell. This is also the first time that TD SYNNEX has done a public event since their merger with Tech Data.

What has the stock done lately?

In the past 6 months, SNX has remained relatively stable, with a decrease of about 3%. When put into comparison with the Russell 2000, SNX has outperformed the index by over 10%. The markets have taken a huge hit recently due to rising interest rates and inflation.

Past Year Performance:

SYNNEX (now TD SYNNEX after merger) entered into a $5 billion credit facility a year ago. They were preparing to acquire Tech Data. Management knew that they would face initial headwinds with this merger, which has led to a decrease in stock price of 19.19% over the past year. With management stating that they have made good progress on the realization of the merger, I do not see this negative performance to be a sign to get out. SNX is beginning to position itself for an exponential growth period.

Source: FactSet

My Takeaway

With such volatility in the markets, SNX has been able to remain relatively flat. With SNX being a distributor, they have also been facing the supply chain issues seen globally. They have been able to still bring in an increasing number of sales each year. Management does not see this to stop any time soon, as they are getting close to realizing the full synergy that the Tech Data acquisition has to offer. While continuing to incorporate Tech Data, SNX has been able to make strategic moves, such as their Rittal partnership. SNX can enter more partnerships like this one as they begin to attend more conventions. As they join into more partnerships and continue to go to more events, they keep increasing their total addressable market. As they continue to grow, management maintains a strong balance sheet, with increasing dividends and share repurchases. It is my recommendation that SNX remain in the AIM small cap portfolio.

Source: FactSet