Jefferies Downgrades Symantec, Says Guidance Is 'Unachievable'

The honeymoon for cybersecurity name Symantec Corporation SYMC is over, according to a Jefferies analyst. 

The Analyst

Jefferies analyst John DiFucci downgraded shares of Symantec from Hold to Underperform and lowered the price target from $30 to $23.

The Thesis

Symantec's guidance, which implies double-digit growth for the fiscal fourth quarter and mid-to-high single-digit growth thereafter, will likely be lowered, DiFucci said in a Thursday note. (See the analyst's track record here.) 

The company delivered total pro forma organic constant currency revenue growth of negative 3 percent to 1 percent in the last four quarters, according to Jefferies.

The website security divestiture will act as a 400-basis-point headwind to enterprise and a 70-basis-point headwind to overall margins, DiFucci said. 

"We believe pursuing both growth and profit simultaneously significantly elevates the execution risk embedded in this stock," he said. 

Jefferies expects the stock to re-rate lower when investors realize the current guidance is unachievable. This is despite Jefferies' stance that Symantec is well-positioned for secular themes such as vendor consolidation and cloud.

"While we believe SYMC offers greater strategic value than the base value alone, with the company delivering flattish growth over recent Qs, we think the premium the shares deserve is meaningfully below where they trade today," DiFucci said. 

The Price Action

Symantec shares are up 3.3 percent over the past year. The stock was down 0.29 percent at $27.44 at the time of publication. 

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Photo courtesy of Symantec.