NortonLifeLock Inc.

NLOK Details

NortonLifeLock Inc. (NASDAQ: NLOK) sells cybersecurity and identity protection for individual consumers through Norton antivirus and LifeLock brands. In more than 150 countries, NLOK has approximately 80 million users. It aids in preventing, detecting, and restoring potential cyber damage caused by a variety of cybercriminals. As of January 14, 2022, the company's market capitalization stood at USD 15.48 billion.

Latest News:

• Lawsuit Filed: According to Kyros Law Offices, the deadline for filing claims from the investor litigation settlement against NLOK, formerly known as Symantec Corporation, is fast approaching on December 31, 2021. The corporation has agreed to pay over USD 70 million to resolve a shareholder lawsuit brought against it by investors. According to the lawsuit, the company made false and misleading representations and omitted to disclose that its internal controls over financial reporting was substantially weak and defective. It later declared that "reporting of some Non-GAAP measures, particularly those that potentially impact executive pay programs", would lead to increased regulatory scrutiny by the SEC. Consequently, its internal controls over financial reporting was significantly weak and poor.

Q2FY22 Results:

• Progress in Revenues: The company's net revenues increased 10.54% to USD 692 million in Q2FY22 (ended October 01, 2021) from USD 626 million in Q2FY22 (October 02, 2020), due to an increase in its direct customer count YoY and revenue attributable to Avira, which was acquired in Q4FY21.
• Improvement in Bottomline: The net income in Q2FY22 was USD 333 million, compared to USD 64 million in Q2FY21.
• Decent Balance Sheet: The company's cash and cash equivalents were USD 1.54 billion as of October 01, 2021, with a total debt of USD 3.85 billion.

Key Risks:

• Dependence on Broadcom: The company's endpoint security solution has previously depended on threat analytics software engines and other software (the Engine-Related Services) developed and provided by engineering teams that transferred to Broadcom as part of the Broadcom sale. As a result, it relies on Broadcom for vital business services. If Broadcom fails to offer these Engine Related Services, it will cause considerable business disruption for the company in the long run.

Outlook:

• Q3FY22 Estimates: As of November 04, 2021, NLOK expect Q3FY22 Non-GAAP EPS to be around USD 0.42-0.44
• FY22 Estimates: It further expects FY22 Non-GAAP EPS to be in USD 1.70-1.75.

Valuation Methodology: Price/Cash Flow Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NLOK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

NLOK's stock price has surged 24.33% in the past nine months and is currently leaning towards the higher-band of the 52-week range of USD 19.41 to USD 28.92. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 61.31. We have valued the stock using the Price/Cash Flow multiple-based relative valuation methodology and arrived at a target price of USD 25.62.

Considering the company's growth prospects, ongoing lawsuits, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 26.88, up 1.05%, as of January 14, 2022.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Disclaimer

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