Improved user numbers and higher average revenue per user led to a 10.5% jump in revenue for this company during the most-recent quarter.
A recent cybersecurity acquisition continues to add to its global user base.
The stock trades at just 15.1 times the company’s 2022 earnings forecast.
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NORTONLIFELOCK INC. (Nasdaq symbol NLOK; www.nortonlifelock.com) has two main businesses: Norton computer antivirus software for individuals; and LifeLock identity-theft protection.
The company last raised its quarterly dividend by 7.0% with the December 2019 payment, to $0.125 a share from $0.075. The new annual rate of $0.50 yields 1.9%.
In the fiscal 2022 second quarter, ended October 1, 2021, revenue rose 10.5%, to $692 million from $622 million a year earlier. That was due to a 12.6% increase in the average number of users as well as higher average revenue per user. Excluding one-time items, earnings rose 18.6%, to $255 million from $215 million; per-share earnings increased at a faster rate of 19.4%, to $0.43 from $0.36, on fewer shares outstanding.
NortonLifeLock is now focused on expanding its consumer business to lift investor returns. Those operations make and sell computer antivirus and email-filtering software for individuals. At the same time, its LifeLock business sells identity-theft protection for individual consumers.
For example, NortonLifeLock is making its Norton 360 for Gamers product available worldwide.
With online gaming on the rise during the pandemic, cybercriminals have taken aim at this industry, which boasts an estimated 2.7 billion gamers globally. A new survey by NortonLifeLock found that 65% of gamers are worried that gaming will become less secure in the future. Further, 35% say they have had a gaming account hacked.
A typical gaming account can include the gamer’s name, birth year, mailing address, email, mobile number, payment information, and other personal information that, with the right mix of information, could be used by identity thieves. Once a gaming account has been breached, the gamer’s other accounts, from banking to social media, are at a much higher risk for account takeovers and fraud.
Growth Stocks: New acquisition should add to earnings immediately
In August 2021, NortonLifeLock agreed to acquire Avast PLC (symbol AVTTY on the U.S. over-the-counter market) for $8 billion in cash and stock. Avast shareholders will own between 14% and 26% of the combined entity.
The combination creates a company with more than 500 million users worldwide and $3.5 billion in annual revenue. The deal should close in mid-2022.
With the merger completed, the company expects to earn $1.74 a share in fiscal 2022, and the stock trades at an attractive 15.1 times that forecast.
The company continues to spend a high 10% of its revenue on research. Those costs depress its current earnings but will help it compete in its rapidly changing industry.
In the meantime, there have been reports that McAfee Corp. (Nasdaq symbol MCFE) might target NortonLifeLock as a takeover candidate.
NortonLifeLock could also attract takeover interest from a number of other parties. Activist investor Starboard Value already has a 7% stake in NortonLifeLock. Private-equity firms Bain Capital and Silver Lake also have significant investments in the company.
Whether a firm takeover offers emerges or not, the mere chance of such a deal adds to the stock’s appeal.
Recommendation in Dividend Advisor: NortonLifeLock Inc. is a buy.
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I began to follow Patrick’s advice in the 1970’s and continue to value his expertise and common sense recommendations plus the input from his excellent team of researchers and advisors. Please never go away!