Has NortonLifeLock Stock Peaked?

by Trefis Team
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Trefis
NLOK
NortonLifeLock
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Based on a comparison of NortonLifeLock stock (NASDAQ: NLOK) trajectory over recent months with that around the 2008 recession, we believe that the stock has peaked at its current level of around $20.

A detailed comparison of NLOK’s performance vs. the S&P 500 is available in our interactive dashboard analysis, No Room For Gain For NortonLifeLock Stock Post-Covid?, In 2008 It Lost 30.5% And Then Gained 29.3%

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. NLOK stock lost nearly 20% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 22% over recent weeks (vs. about 32% gain in the S&P 500) to its current level of $20.

 

NortonLifeLock’s Recent Decisions Have Put It In A Tricky Spot

The extended quarantine and lockdowns in many countries mean that people are not stepping out at all, and have been working from home. This has heightened the need for internet security and companies are focusing more and more on security solutions. However, NLOK sold its enterprise security business to Broadcom in 2019, to shift its entire focus to the consumer security segment, which has not been benefiting as much. This has prevented NLOK from fully exploiting the situation on both, a consumer and enterprise level.

However, NLOK’s sales are not expected to take a major hit, while even being somewhat supported by the increased need for security on a consumer level, in the near term. Regardless, if signs of coronavirus containment aren’t clear by the Q1 earnings in August, it’s likely NLOK stock, along with the broader market, is going to see another round of sell-offs when results confirm palpable reality.

 

But NortonLifeLock Stock Witnessed Something Similar During The 2008 Downturn

We see NLOK stock declined from levels of around $14 in October 2007 (the pre-crisis peak) to roughly under $10 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 30% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.
However, NLOK recovered similarly post the 2008 crisis to over $12 by early 2010 – rising by nearly 30% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will NLOK Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that NLOK stock fell nearly 20% from the market peak on February 19 to the low on March 23 compared to the 30% decline during the 2008 recession, we believe it’s upside potential from the low of $16.50 will be around 20%, which it has already achieved, currently priced at around $20. This marks almost a full recovery to the $20.50 level that NLOK stock was at before the coronavirus outbreak gained global momentum.

That said, further upside and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. Covid-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak impact on a diverse set of companies. The complete set of coronavirus impact and timing analyses is available here.

See all Trefis Price Estimates and Download Trefis Data here

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