Gen Digital Earnings: Another Quarter of Strong Profitability as Firm Closes Out Fiscal 2024

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.