Recent Acquisitions Have Led To Over A 50% Increase In Our Price Estimate For Symantec

We recently increased our price estimate for the world’s leading software security company,  Symantec (NYSE:SYMC), by over 50% to $30. Symantec’s stock price has risen by more than 70% in the last nine months, primarily because of the Blue Coat and LifeLock acquisitions. Blue Coat is the world’s leading cloud security company and was acquired by Symantec in mid-2016 for $4.3 billion. On the other hand, LifeLock is a leader in identity theft protection, and was acquired in February 2017 for $2.3 billion. Both these companies combined are likely to add over a billion dollars in annual revenue to the company’s top line in 2017, increasing our revenue estimates for 2017 by 15%.

Symantec’s strong cost saving initiatives have led to a 4% and 2% rise in the EBITDA margins of consumer and enterprise security division, respectively, in CY 2016, as compared to the same period last year. The company plans to save over $400 million in costs, out of which it had guided to complete $200 million by the end of FY’17 which has ended this March. Apart from this, Symantec is anticipating $150 million savings in the form of cost synergies from the Blue Coat acquisition, which will help in strengthening Symantec’s bottom line further. Our estimate for Symantec’s 2017 EBITDA margins has risen by 3%.

See our complete analysis for Symantec

Blue Coat And LifeLock – A Gift For Enterprise And Consumer Security, Respectively

• Blue Coat is the leading player in cloud security, and with the fast transition of all software companies like Oracle, IBM, and Microsoft onto cloud, there is a huge demand lined up for cloud security. Data protection is one of the primary reasons which is holding back large enterprises from shifting their operations on to cloud. Therefore, cloud security will play an important role in overcoming this challenge in the future.
• According to Allied Market Research, the cloud security market is expected to reach $8.9 billion by 2020 at a compounded annual growth rate of 23%. The revenues of Blue Coat will be reported in the enterprise security division of Symantec.
• On the other hand, LifeLock is a major player in identity theft protection. With a rise in smartphone usage across the world, there is a lot of personal data being uploaded everyday, which has left the identity of users prone to thefts and misuse.
• According to a report by IBIS World, the identity theft protection market has grown slowly, but steadily, at around 2.4% to reach $3.2 billion in 2015. It estimates this steady growth to continue through 2020, led by strong demand due to the growing number of online banking transactions.
• LifeLock is expected to put an end to a steady decline in Symantec’s consumer security revenues, at least in the short term. Prior to this acquisition, Symantec’s consumer security revenues were falling at an annual rate of over 18%.

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