The growing popularity of using fingerprints to unlock mobile phones and other devices is expected to drive growth at Synaptics Inc (SYNA.O), which makes the chips enabling the technology popularized by Apple Inc's (AAPL.O) iPhone 5S.
Synaptics' chips for fingerprint ID and touchscreens are used in Samsung Electronics Co Ltd's (005930.KS) Galaxy S5, and strong sales of the smartphone will help Synaptics post its strongest annual revenue growth since 2007.
The chipmaker's shares soared as much as 14 percent to $72.75 in after-hours trading, after touching their all-time high of $67.71 in regular trading on Thursday.
Synaptics could boast of a market share of as much as 80 percent in fingerprint recognition technology for the next few quarters as the S5 will be the dominant smartphone being shipped with the technology, Feltl & Co analyst Jeffrey Schreiner said.
The company entered the fingerprint ID market through the acquisition of Validity Sensors Inc last October, with which it also got its entry into Samsung's phones. It was not clear if Synaptics also supplies to Apple.
Schreiner said Synaptics market share in the fingerprint ID market could fall with the launch of Apple's new phone, rumored to be in September, and other smartphones.
However, Stifel Nicolaus and Co analyst Kevin Cassidy expects Validity to be Synaptics' catalyst for growth next year.
"They have got 45 percent market share in touch control in handsets and we think they could get that kind of market share in fingerprint."
For now, strong demand for touchscreen devices in general helped Synaptics post better-than-expected results for the third-quarter ended March 31 and forecast a strong finish to the fiscal year.
Synaptics' forecast revenue growth of 37-40 percent for the year ending June 30. Revenue growth was last better in 2007, when it clocked a 44.6 percent rise.
Charges related to the acquisition of Validity Sensors pushed the company to a net loss of $40.1 million, or $1.12 per share, in the third quarter ended March 31.
However, Synaptics said the deal added to non-GAAP earnings a quarter ahead of schedule. Its non-GAAP, or adjusted, profit of 63 cents per share was well ahead of analysts' average estimate of 57 cents per share.
Revenue rose a better-than-expected 25 percent to $204.3 million, as business from mobile phone clients rose 44 percent.
Synaptics forecast fourth-quarter adjusted earnings of $1.10-$1.32 per share on revenue of $275-$295 million.
Analysts on average were expecting profit of 98 cents on revenue of $231.3 million, according to Thomson Reuters I/B/E/S.
The company's stock has risen 71 percent in the past 52 weeks, outperforming the broader S&P 500 semiconductors index.SPLRCELCS.
(Additional reporting By Sruthi Ramakrishnan and Supantha Mukherjee in Bangalore; Editing by Savio D'Souza)