13. TD SYNNEX Corporation (NYSE:SNX)
Short % of Shares Outstanding: 2.08%
Number of Hedge Fund Holders: 46
Forward Price to Earnings Ratio as of August 28: 10.39
TD SYNNEX Corporation (NYSE:SNX) is a major information technology distribution company, which was formed by the merger of Synnex and Tech Data in 2021. It sells a wide range of products and services including technology products, data center solutions, assembly and integration services, cloud services, and much more.
It operates through Cloud Services, Professional Services, Supply Chain Services, and Financial Services segments. The IT distribution services is a high-growth business model and the margins improve by distributing more software and services, TD SYNNEX Corporation (NYSE:SNX) has done well in capturing the market. It has more than 200,000 products and solutions, 2,500 plus OEMs and vendor partners, and more than 150,000 customers. It is an investor-favorite stock and was held by 46 hedge funds in Q2 2024, with total stakes worth $1.52 billion. Brave Warrior Capital is the top shareholder of SNX with a position worth $383.3 million.
The second quarter of 2024 was a testimony to the company’s profitability. It was able to grow its gross billings by $19.3 billion by 3% year-over-year, stemming from growth in all business areas, especially its Strategic Technologies segment. The Strategic Technologies segment, which focuses on next-generation technologies including cloud, cyber security, IoT, AI, and Data accounted for 25% of the gross billings.
Although the total revenue of the company was down 4% year-over-year, TD SYNNEX Corporation (NYSE:SNX) was still able to improve its gross margins by 27 base points. Management believes that the market has stabilized and remains confident to improve their revenues and gross billing prospects during the remaining half of fiscal 2024.
The prospects of growth are bright, as the company has well-positioned itself to leverage the growing AI market. TD SYNNEX Corporation (NYSE:SNX) has entered into vendor partnerships and launched IBM’s Watson Gold 100 Program to accelerate AI opportunities for partners. Moreover, the company has also been named a design partner for NVIDIA’s HGX product line.
Looking at the FQ3 guidance, management expects revenue between $13.3 – $14.9 billion and gross billings to reach $20.1 billion. The increased guidance is fueled by its PC refresh cycle, customer investment in data center and cloud deployments, and its increased investment in AI ventures.
SNX is undervalued at current levels. It is trading at only 10 times its forward earnings, a 57% discount to its sector, and its earnings are also expected to grow by 4.40% during the year to reach $11.8.
FPA Queens Road Small Cap Value Fund stated the following regarding TD SYNNEX Corporation (NYSE:SNX) in its Q2 2024 investor letter:
“TD SYNNEX Corporation (NYSE:SNX) is an information technology (IT) distributor formed through the merger of Tech Data and Synnex in 2021. IT distribution is an attractive business model that grows at a GDP+ rate with the opportunity for margin improvement through selling more software and services, although with some cyclicality. The IT distributors have historically traded cheaply, usually at less than 10x earnings.22 We have owned Synnex since 2012 and Tech Data from 2010 until it was taken private by Apollo in 2020. SNX has performed well on the back of a strengthening IT market, particularly for PCs.”
