‘NortonLifeLock appears as one of the clearer paths to EPS growth in software’ in an uncertain macro environment, Morgan Stanley says.
The stock recently traded at $21.25, up 0.8%. It has gained 9% over the past six months.
Reacting to the Tempe, Ariz., company’s Monday report, Morgan Stanley’s Hamza Fodderwala affirmed an overweight rating and $26 price target for Norton.
“Given a largely direct-to-consumer business model, a recent uptick in marketing spend driving better customer additions, and the acquisition of Avira with its freemium model, NortonLifeLock appears as one of the clearer paths to earnings-per-share growth in software, particularly amid an uncertain macro environment,” he wrote in a commentary
“The current valuation for NLOK implies modest declines in free cash flow in perpetuity, which we think is too onerous, setting up an attractive risk/reward” balance.
Barclays analyst Saket Kalia has an overweight rating and lifted his price target to $31 from $27.
He sees “the model ultimately generating $1.50 in earnings per share and $900 million in free cash flow once stranded costs are eliminated.” He thinks those stranded costs can be eliminated faster than expected.
And “the core business shows signs of improvement from increased marketing and international expansion,” Kalia said.
Meanwhile, the Action Alerts team PLUS team “came away from the earnings release and investor day materials with increased conviction in our bullish view that the company has positioned itself for accelerating growth in the years ahead.”