Clients said to be sticking with Morgan Stanley even after leaked deal pipeline

Morgan Stanley has increased its price target for TD Synnex Corp (NYSE:SNX) following a robust quarter, according to <source>. The investment firm cited superior-than-anticipated earnings, rapid growth, and enhanced operating leverage as key factors influencing their decision. They have raised their price target from $334 to $359 and maintained an Overweight rating on the stock, now designating it as their top enterprise hardware name in coverage.

Analysts pointed out that the company's fiscal third-quarter revenue and earnings per share exceeded expectations by 13%-21%, while fourth-quarter guidance surpassed Street projections by 12%-25%. Morgan Stanley also increased its earnings estimates for fiscal 2027 and 2028 by 12%-15%, citing stronger growth and operating leverage.

The firm anticipates enterprise artificial intelligence demand to bolster the Distribution business, while new hyperscaler programs are expected to fuel growth at Hyve Solutions, TD Synnex's data-center infrastructure unit. Distribution gross billings grew by 27% year-on-year, whereas Hyve gross billings surged by 117%. The investment bank noted that the transition of enterprise AI from experimentation to production is fueling demand for compute, storage, networking, and security solutions.

While they acknowledged pressure on Advanced Solutions gross margins, they attributed it to mix-driven factors, as larger infrastructure and AI deals carry lower margins. Operating expenses as a percentage of revenue declined to 3.63%, the lowest level in over five years, and Morgan Stanley expects free cash flow to become positive in the fourth quarter as investments in Hyve's new customer programs ease, with further improvements anticipated in fiscal 2027.