NortonLifeLock Inc.

NLOK Details

NortonLifeLock Inc. (NASDAQ: NLOK) is a consumer cyber safety platform protecting consumer devices, online privacy, identity, and home networks from cybercrime. NLOK product line consists of Norton 360 Security offerings, Norton Security, Norton Secure virtual private network (VPN), Avira Security, and other consumer security solutions. It is primarily focused on offering subscription-based cyber security products directly to consumers through the Norton and Avira websites and indirectly through partner relationships with retailers, telecom service providers, and original equipment manufacturers (OEMs).

Launch of AntiTrack: On October 05, 2021, NLOK launched AntiTrack, a brand-new privacy service that helps consumers secure their digital footprints from corporations and websites that track online behavior and collect personal information. AntiTrack is a new app and browser extension that stops websites from following and profiling users in ways that standard private browsers and VPNs cannot.

Merger to Become a Leading Cyber Security Company: On August 10, 2021, NLOK signed a merger agreement with Avast, engaged in digital security and privacy products, for a total market value in the range of USD 8.1 – 8.6 billion. Under the merger agreement, AVST shareholders will be eligible to receive a combination of cash and newly issued NLOK shares, with other consideration options available. This merger furthers the transformation of NLOK' consumer cyber security platform with over 500 million users and offers USD 280 million in annual cost synergies.

Q1FY22 Results: The company reported YoY growth of 11.73% in net revenues to USD 686 million in Q1FY22 (ended July 02, 2021) compared to USD 614 million in Q1FY21 (ended July 03, 2021). The Consumer Security segment, which accounted for 60.06% of the total revenue in Q1FY22, reported YoY growth of 13.50%. Net income for Q1FY22 increased to USD 181 million from USD 118 million in Q1FY21. During the quarter, the company declared a quarterly dividend of USD 0.125 per share, which was paid on September 15, 2021, to shareholders of record on August 23, 2021. NLOK board also approved an incremental share repurchase authorization of USD 1.5 billion, with USD 1.77 billion remaining as of July 02, 2021.

Key Risks: NLOK operates in the highly competitive software industry and faces direct competition from more significant players with higher financial and technological capabilities at their disposal. Hence, any advanced innovation or superior product development by its competitors could affect its market share and impair its financial performance.

Outlook: In Q2FY22, NLOK expects its revenue to range between USD 690 – 700 million, thus realizing YoY growth of 10% – 12%, with a non-GAAP EPS ranging from USD 0.41 – 0.43. For FY22, NLOK anticipates a YoY growth of 8% – 10% in total revenue, along with non-GAAP EPS of USD 1.65 – 1.75.

Valuation Methodology: Price/Cash Flow Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY1 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 share price has decreased 4.78% in the past three months and is currently leaning towards the higher band of its 52-week range of USD 17.98 to USD 28.92. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 53.46. We have valued the stock using the Price/Cash Flow-based relative valuation methodology and arrived at a target price of USD 28.74. Considering the slight correction in the stock price, growth in top and bottom-line, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 26.00, up 1.27% as of October 11, 2021, 10.49 AM ET.

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

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

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