Key insights
- The analysis suggests TD SYNNEX is undervalued due to the market underappreciating its Hyve hyperscale ODM business. The author believes that as Hyve's financial performance becomes more visible, the market will re-rate the stock, potentially leading to a 40% upside. This re-rating could positively influence the broader tech sector by highlighting hidden value in diversified IT companies.
TD SYNNEX is one of the world's largest IT distributors. The market prices it like one. It's actually two fundamentally different businesses.
Distribution: $1.72B annualized operating income, growing 42% YoY, mix shifting toward software, security, and cloud. At 9x (peer midpoint), that's ~$15.5B EV or roughly the entire current market cap.
Hyve: A custom hyperscale ODM with programs across all five top US hyperscalers, $636M annualized operating income, growing 66% YoY. At 15x (below where Celestica trades), that's ~$9.5B standalone EV. The market is ascribing approximately zero to it.
Depending on which multiples you give Hyve, there could be a serious re-rating as it gets a larger part of the revenue mix and investors start to reprice the stock.
My assumptions for a SOTP is $272 implied vs $193 today. ~40% upside using run-rate earnings and peer multiples. No growth assumption baked in.
The mispricing exists because Hyve only started reporting as a standalone segment this quarter. Four quarters of visible numbers should make the blended distributor multiple increasingly hard to justify.