Higher expenses caused earnings to drop 11.4% in the most recent quarter and weaker spending by business clients seems unlikely to improve.
However, the stock trades at just 12 times the 2020 earnings forecast and upcoming government regulations requiring companies to guard customers’ private data should spur long term cybersecurity growth.
The company’s strong commitment to research should help stabilize its earnings as more businesses seek to shield themselves from cybercrime.
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SYMANTEC CORP. (Nasdaq symbol SYMC; www.symantec.com) sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers.
The company pays a quarterly dividend of $0.075 a share for an annual rate of $0.30; the shares yield 1.5%.
The stock is down 16.4% from its recent peak of $24.77 on April 17, 2019. That’s due to weaker-than-expected revenue growth. As well, Symantec’s CEO, Greg Clark, suddenly resigned. Board member Richard Hill, the former chairman and CEO of Novellus Systems, will serve as interim CEO.
The stock recently jumped in price this week (cut) after major U.S. banker Goldman Sachs upgraded its recommendation to “buy” from “neutral.”
In its report, Goldman Sachs mentioned a few of the factors that we’ve been pointing out for quite a while. That includes Symantec’s strong sales to big corporations that continue to spend more to shield themselves from cybercrime. The report also points out that the stock is inexpensive compared to shares of other cybersecurity firms.
Growth Stocks: Revenue misses estimates but earnings on target
Meanwhile the company’s revenue in its fiscal 2019 fourth quarter, ended March 29, 2019, fell 1.7%, to $1.19 billion from $1.21 billion a year earlier. That missed the consensus estimate of $1.20 billion. The decline was mainly due to lower revenue from business clients, which offset higher results at its consumer business.
Earnings per share, excluding one-time items, dropped 11.4%, to $0.39 from $0.44. The drop was mostly due to higher expenses. Still, the latest earnings matched the consensus forecast.
Symantec expects revenue of between $4.76 billion and $4.90 billion for the fiscal year ending March 31, 2020. However, the midpoint of that range—$4.83 billion—is below the consensus forecast of $4.97 billion due to weaker spending by business clients. Its likely earnings for the year—$1.73 a share—also misses the consensus estimate of $1.77.
However, the stock trades at just 12.0 times the 2020 earnings forecast. That’s a particularly low p/e considering the company continues to spend a high 19% of its revenue on research.
Symantec’s strong commitment to research will also help it benefit as more businesses shield themselves from cybercrime. Severe attacks, like a denial-of-service, can cripple entire organizations, while malware and phishing attacks target individuals via emails containing dangerous links and attachments. New government regulations that require businesses to guard the private data of their customers should also spur its long-term growth.
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