Morgan Stanley Raises TD Synnex Price Target, Cites Strong AI Demand

Morgan Stanley has substantially raised its price target for technology distributor TD Synnex Corp. (NYSE:SNX) following a robust fiscal third-quarter performance that significantly outpaced market expectations. The investment bank also elevated the company to its most favored enterprise hardware stock.

Analyst Revision

In a note to clients, Morgan Stanley analysts increased their price target on TD Synnex to $359 from $334, while reiterating their Overweight rating on the stock. The revision was prompted by stronger-than-expected earnings, accelerating business growth, and improving operating leverage.

The bank also raised its earnings per share estimates for the company's fiscal 2027 and 2028 by 12%-15%, citing confidence in sustained growth and operational efficiency.

Strong Quarterly Performance

TD Synnex's fiscal third-quarter results were a key driver for the upgraded outlook. According to the report, the company's revenue and earnings per share beat consensus estimates by 13% to 21%. Furthermore, its guidance for the upcoming fourth quarter came in 12% to 25% above Wall Street expectations.

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This performance was underpinned by significant growth in its core segments:

• Distribution gross billings rose 27% year-over-year.
• Hyve gross billings, from its data-center infrastructure unit, jumped 117% year-over-year.

AI and Data Centers Fueling Growth

Morgan Stanley attributed the strong results to surging demand related to enterprise artificial intelligence. Analysts noted that the market's shift from AI experimentation to production is driving demand for compute, storage, networking, and security solutions distributed by TD Synnex. Growth at the Hyve Solutions unit is being supported by new programs with hyperscaler clients.

While acknowledging some pressure on gross margins in the Advanced Solutions division, analysts said this was primarily due to a business mix shift toward larger infrastructure and AI deals, which typically carry lower margins. The firm also highlighted TD Synnex's operational efficiency, with operating expenses as a percentage of revenue falling to 3.63%, its lowest level in over five years. Morgan Stanley expects the company's free cash flow to turn positive in the fourth quarter.