Company Reports

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm closed the chapter on fiscal 2024 with a set of strong results, largely in line with our estimates. Despite operating in a tough macro environment, especially in the consumer-facing security market that is more prone to macro pressures, we remain impressed with Gen’s ability to incrementally improve its profitability while also growing in the low single digits. With an eye on the long term, however, we reiterate our view that consumer-facing security is a commodity-like market, with little switching costs and plenty of price competition. We believe investors also viewed the results as largely positive, especially considering the tumultuous macroeconomic backdrop, with shares trading up after Gen’s earnings report. While we view the firm’s shares as fairly valued, we’d ask investors seeking security exposure to focus on moatier security names such as Fortinet and Zscaler that trade at discounts to our fair value estimates.

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm closed out its third quarter of fiscal 2024 with a top line below our estimates offset by profitability ahead of our forecasts. We appreciate the firm’s commitment to profitability during a time of macro uncertainty that has impacted demand in consumer-facing cybersecurity. While we expect Gen to incrementally expand its margins over our five-year explicit forecast, we remain pessimistic on the overall space Gen occupies as a large player in a commodity-like consumer security market. We think investors were left unimpressed by Gen’s topline growth as shares traded down sharply after hours. We view shares as fairly valued after the sell-off and would encourage investors seeking cybersecurity exposure to consider Fortinet, a wide-moat security vendor that is also trading in the three-star range.

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm reported a solid second quarter largely in line with our prior estimates. Along with the second-quarter results, the firm also hosted an investor day, detailing its long-term operating model and reiterating the cost synergies the firm expects to extract following its Avast acquisition in calendar 2022. While we expect Gen’s adjusted operating margin to expand over our explicit forecast, we view Gen as a no-moat business, primarily due to its presence in a commodity-like consumer security market that has limited customer switching costs. Following the earnings report, Gen’s shares are trading in the 3-star range and fairly valued.

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm kicked off fiscal 2024 with financial results largely in line with our estimates. We reiterate our belief that despite being a large fish in the consumer cybersecurity pond, Gen’s long-term financial prospects are restricted by the commodity-like nature of the consumer security market the firm operates in. At the same time, we believe Gen can expand margins as it digests the Avast acquisition and sets its target on building a more efficient combined business unit. Relatedly, we believe Gen can unlock value in Avast’s customer base by improving customer retention and increasing Avast customers’ average revenue per user which still lags Gen’s Norton offering. Following the earnings report, Gen’s shares are trading in the 3-star range and are fairly valued.

We are lowering our fair value estimate for no-moat Gen Digital to $21 from $24 after the firm closed out fiscal 2023 with results meeting our expectations, but first-quarter guidance is below our prior forecast. We are also moderating our medium-term top-line growth estimate, which also contributed to our fair value estimate being trimmed. With shares down 2% after-hours, we view Gen’s shares as moderately undervalued. While we maintain our no moat rating for Gen, driven primarily by the commodity-like consumer cybersecurity market the firm operates in, we see a path to margin expansion as the firm seeks to build a more efficient business unit following its acquisition of Avast in fiscal 2023.

We think Gen Digital is a strong player in the consumer-oriented security space. With offerings ranging from security, identity protection, and privacy, Gen has its fingers in many consumer-focused pies. However, as we look at the overall consumer-focused cybersecurity space, we see cutthroat competition, a lack of pricing power, and a lack of evident customer switching costs. With these factors top of mind, we expect Gen's future growth prospects to not be in excess of low single digits.

We are maintaining our $24 fair value estimate for Gen Digital after the firm reported third-quarter financial results largely in line with our forecasts. While we maintain our no-moat rating for Gen, primarily due to the commodification of consumer-facing cybersecurity, we see potential growth and margin expansion opportunities as the firm seeks to extract synergies from its recent acquisition of Avast.

We are maintaining our $24 fair value estimate for Gen Digital (formerly NortonLifeLock) after the firm reported fiscal second-quarter results broadly in line with our estimates. While we maintain our no-moat rating for Gen, primarily due to the competitive dynamics within the consumer-facing cybersecurity space, we see potential growth opportunities for the firm via international expansion and increased utilization of partner channels.

We think Gen Digital is a strong player in the consumer-oriented security space. With offerings ranging from security, identity protection, and privacy, Gen has its fingers in many consumer-focused pies. However, as we look at the overall consumer-focused cybersecurity space, we see cutthroat competition, a lack of pricing power, and a lack of evident customer switching costs. With these factors top of mind, we expect Gen's future growth prospects to not be in excess of low single digits.

We are resuming coverage of no-moat NortonLifeLock with a $24 fair value estimate. Shares appear fairly valued to us. Our long-term forecasts are unchanged, and we continue to view NortonLifeLock as a strong player in the consumer-oriented security space.

We are placing NortonLifeLock under review and expect to resume coverage in the near future.

We think NortonLifeLock is a strong player in the consumer-oriented security space. With offerings ranging from security, identity protection, and privacy, NortonLifeLock has its fingers in many consumer-focused pies. However, as we look at the overall consumer-focused cybersecurity space, we see cutthroat competition, a lack of pricing power, and a lack of evident customer switching costs. With these factors top of mind, we expect NortonLifeLock's future growth prospects to not be in excess of low single digits.

NortonLifeLock, composed of Norton antivirus and LifeLock identity protection solutions, is the remaining portion of Symantec, as Symantec's enterprise security business was sold to Broadcom for $10.7 billion in November 2019. The company lacked consistency at the helm as its enterprise security business struggled in the 2010s but has planted its flag to solely be consumer focused. Norton cybersecurity solutions and LifeLock identity theft protection are prominent brands that offer individuals and families security from malicious threats on devices and their personas. While we expect the consumer cybersecurity market to remain highly competitive, NortonLifeLock is combining antivirus and identity protection into a holistic offering to provide a unique competitive advantage within consumer safety. As more individuals have their data leaked and hacks make headline news, NortonLifeLock can be a main beneficiary.

We are raising our fair value estimate for no-moat NortonLifeLock to $24 per share from $21 due to slightly increased growth expectations over our forecast period and the time value of money as we roll our financial model. While we remain concerned about no-moat NortonLifeLock’s competitive landscape, we see potential growth opportunities for the firm via international expansion and increased utilization of partner channels.

NortonLifeLock, composed of Norton antivirus and LifeLock identity protection solutions, is the remaining portion of Symantec, as Symantec's enterprise security business was sold to Broadcom for $10.7 billion in November 2019. The company lacked consistency at the helm as its enterprise security business struggled in the 2010s but has planted its flag to solely be consumer focused. Norton cybersecurity solutions and LifeLock identity theft protection are prominent brands that offer individuals and families security from malicious threats on devices and their personas. While we expect the consumer cybersecurity market to remain highly competitive, NortonLifeLock is combining antivirus and identity protection into a holistic offering to provide a unique competitive advantage within consumer safety. As more individuals have their data leaked and hacks make headline news, NortonLifeLock can be a main beneficiary.

We are maintaining our $21 fair value estimate for no-moat NortonLifeLock after it reported third-quarter results that matched our expectations, and we view shares as slightly overvalued. While we believe NortonLifeLock is doing a commendable job creating growth with an improving operating margin profile, we remain cautious about the long-term competitive environment in consumer cybersecurity and low barriers to changing vendors. NortonLifeLock's pending acquisition of Avast, which is now expected to close on Feb. 24 instead of the middle of 2022, should help accelerate near-term growth. We expect this will help accelerate NortonLifeLock's international expansion and open up upselling opportunities within Avast's customer base.

We are maintaining our $21 fair value estimate for no-moat NortonLifeLock after clocking in a solid quarter, with top-line growth matching our expectations. Management also provided a brief update on NotonLifeLock’s merger with fellow consumer cybersecurity firm Avast, a deal the firm expects to close in the middle of 2022. We believe this deal will allow NortonLifeLock to aggressively increase revenue while achieving its $3 adjusted earnings per share target in the coming years. Although we think NortonLifeLock is executing well in finding growth in consumer safety and are optimistic about the opportunities the merger with Avast brings, we remain cautious about the consumer security market and the ability to drive sustainable long-term growth amid a competitive pricing environment. As a result, we view shares as modestly overvalued and believe investors should wait for a larger margin of safety.

We are maintaining our $21 fair value estimate for no-moat NortonLifeLock after announcing its intention to merge with fellow consumer cybersecurity firm Avast. The news follows NortonLifeLock recently acknowledging rumors of Avast combination talks, and we believe this merger is in line with NortonLifeLock’s plan to use mergers as a growth accelerator with a focus on extracting overlapping costs. The deal puts Avast’s enterprise value between $8.6 billion and $9.2 billion, depending on how Avast shareholders elect to receive a majority stock or cash option. We updated our model with the assumption that the merger occurs in the middle of 2022 as expected, helping the company rapidly expand its revenue growth rate and achieve its reiterated adjusted earnings target of $3 per share in the coming years. Nevertheless, we still remain more cautious about the consumer security market and ability to drive sustainable long-term growth amid a competitive pricing environment, and see shares slightly overvalued.

We are maintaining our $21 fair value estimate for no-moat NortonLifeLock after reporting first-quarter earnings. Top line growth and earnings in the quarter closely matched our anticipations and our fiscal 2022 outlook remains largely intact after NortonLifeLock reiterated yearly expectations initially stated in May. Although we believe NortonLifeLock is executing well in finding growth in consumer safety, building a security platform expanding beyond antivirus solutions, while keeping a very strong operating profile, we remain more cautious about the long-term competitive environment in consumer cybersecurity. We view shares as modestly overvalued and believe investors should wait for a larger margin of safety.

NortonLifeLock, composed of Norton antivirus and LifeLock identity protection solutions, is the remaining portion of Symantec, as Symantec's enterprise security business was sold to Broadcom for $10.7 billion in November 2019. The company lacked consistency at the helm as its enterprise security business struggled in the 2010s but has planted its flag to solely be consumer focused. Norton cybersecurity solutions and LifeLock identity theft protection are prominent brands that offer individuals and families security from malicious threats on devices and their personas. While we expect the consumer cybersecurity market to remain highly competitive, NortonLifeLock is combining antivirus and identity protection into a holistic offering to provide a unique competitive advantage within consumer safety. As more individuals have their data leaked and hacks make headline news, NortonLifeLock can be a main beneficiary.