Morgan Stanley Raises TD Synnex Price Target to $359 on Strong AI Demand

Morgan Stanley raised its price target on TD Synnex Corp (NYSE: SNX) after the technology distributor delivered stronger-than-expected fiscal third-quarter results and an upbeat outlook, supported by accelerating enterprise artificial intelligence demand.

The investment bank increased its TD Synnex price target to $359 from $334 while maintaining an Overweight rating. Analysts also named TD Synnex their most favored enterprise hardware stock within their coverage.

TD Synnex's fiscal third-quarter revenue and earnings per share exceeded consensus estimates by between 13% and 21%, according to Morgan Stanley. The company's fiscal fourth-quarter guidance was also 12% to 25% above Wall Street expectations.

Following the results, Morgan Stanley lifted its fiscal 2027 and 2028 earnings forecasts by 12% to 15%, citing stronger revenue growth and improving operating leverage.

Enterprise AI spending is expected to remain an important growth driver for TD Synnex's Distribution business as companies move artificial intelligence projects from testing into production. That transition is increasing demand for computing infrastructure, storage, networking equipment and cybersecurity products.

Meanwhile, new hyperscaler programs are expected to boost Hyve Solutions, TD Synnex's data-center infrastructure unit. Distribution gross billings increased 27% from a year earlier during the quarter, while Hyve gross billings surged 117%.

Morgan Stanley noted that Advanced Solutions gross margins remain under pressure. However, analysts attributed much of the weakness to product mix, as larger infrastructure and AI-related transactions generally carry lower margins.

Operating efficiency showed improvement, with operating expenses falling to 3.63% of revenue, the lowest level in more than five years. That decline supports Morgan Stanley's view that TD Synnex is beginning to benefit from stronger operating leverage as sales expand.

The bank also expects TD Synnex's free cash flow to return to positive territory in the fiscal fourth quarter as spending tied to Hyve's new customer programs moderates. Further cash-flow improvement is projected in fiscal 2027 as AI infrastructure demand and hyperscaler activity continue supporting growth.