Key Points
- Gen Digital was formed through the merger of Norton LifeLock and Avast in 2022, serving half a billion users in 150 countries.
- Gen Digital revenues grew 26.7% YoY in Q3 2023.
- GEN trades at 9.75X forward earnings and pays a 2.59% annual dividend yield.
- 5 stocks we like better than Gen Digital
Cybersecurity products and services provider Gen Digital Inc. NASDAQ: GEN may not sound familiar until you discover its products and brands. While enterprise cybersecurity firms like Palo Alto Networks Inc. NASDAQ: PANW and Crowdstrike Holdings Inc. NASDAQ: CRWD get the spotlight, consumer cybersecurity tends to get overlooked. This is the niche that Gen Digital was created to address. Gen Digital was formed through the $8 billion acquisition of Avast by Norton LifeLock and then a name change in November 2022.
Gen Digital is a computer and technology sector member with a well-known product portfolio that protects consumers and retail users from cyber threats. It is one of the world's largest consumer cybersecurity companies, with over 500 million users of its products and services.
Portfolio of services
Gen Digital has many well-known security brands under its umbrella, including Norton, Avast, LifeLock, Avira, AVG, Reputation Defender and CCleaner. Norton provides antivirus, anti-malware, VPN private internet connection, ransomware and hacking protection software. It also provides cloud backup, password protection, firewall and spyware removal. LifeLock is a leading provider of identity theft protection, dark web monitoring and credit monitoring services.
Avira is a free and premium cybersecurity service provider with antivirus, VPN, password manager, update scanner and real-time data break alerts. AVG provides real-time virus and malware protection with a free download and optional premium plans, including mobile device protection used by over 430 million users worldwide.
CCleaner is a system optimization to speed up and clean PCs. Reputation Defender is an online reputation and brand management service. Many of the services overlap each other, but the company has achieved cost synergies. Some plans enable the bundling of services, like the Norton 360 with the LifeLock plan, which combines the benefits of the two services for a single fee at a deep discount.
Building out the Gen stack
Gen Digital has an IP portfolio with over 1,000 patents. It trains its models on data sets that are 6,000 terabytes large and can update the models 500 times a day to block one billion attacks. The company has spent the last year putting all its brands onto a single tech stack, Gen stack, providing brand synergy and cost savings. Check out the sector heatmap on MarketBeat.
Steady growth
On November 7, 2023, Gen Digital released its fiscal second-quarter 2024 results for September 2023. The company reported an earnings-per-share (EPS) profit of 47 cents, matching consensus analyst estimates. Revenues grew 26.7% YoY to $948 million, beating $945 million analyst estimates. Bookings rose 28% YoY to $923 million. Operating margins rose 600 bps to $57.9%.
In-line guidance
Gen Digital issued in-line fiscal Q3 2024 EPS of 49 to 51 cents versus 51 cents analyst estimates. Revenues are expected between $950 million to $960 million versus $964.5 million analyst estimates. For fiscal full-year 2024, Gen Digital expects EPS of $1.95 to $2.00 versus $1.98 consensus estimates. Fiscal full-year 2024 revenues are expected to be between $3.810 billion to $3.83 billion versus $3.82 billion analyst estimates.
CEO Insights
Gen Digital CEO Vince Palette commented on the consumer cyber safety landscape and history. The company made a concerted effort to recognize the underlying growing trends in consumer cyber safety. Symantec sold the Enterprise business to Broadcom Inc. NASDAQ: AVGO for $10.7 billion in November 2019 to establish itself as the first consumer cyber safety company dedicated to consumers.
Palette commented about the painful debt financing environment, "We'll commit to grow EPS double digit in 12% to 15%. And I think the only headwinds we've had, as we delivered on all of our merger commitments, was the cost of the debt, the interest rate at the time we signed the deal, as you know, it was 0%, and today, it's a painful 5% plus." They will commit to de-levering its debt to deliver 60% margins.
Gen Digital financial statements can be found on MarketBeat. Gen Digital peers and competitor stocks can be found with the MarketBeat stock screener.
Weekly descending triangle
The weekly candlestick chart on GEN illustrates a descending triangle pattern. The descending trendline commenced in February 2022 after peaking at $29.70. GEN proceeded to sell off and make lower highs on bounces, forming the descending trendline. The double bottom at $15.24 formed the flat-bottom horizontal trendline. Shares fell under the daily 200-period moving average, which now overlaps with the descending trendline at $21.12. The weekly market structure low (MSL) triggered above $16.94. The weekly relative strength index (RSI) bounced towards the 60-band. Shares are again trying to retest the descending trendline near $19.62. Pullback support levels are $18.38, $16.94 weekly MSL trigger, $15.24 and $13.73.
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