Symantec Just Took 'One On The Chin,' Stifel Says

Cybersecurity giant Symantec Corporation SYMC reported its fiscal first-quarter results Thursday and took "one on the chin," according to Stifel.

The Analyst

Stifel's Gur Talpaz maintains a Hold rating on Symantec with a price target lowered from $21 to $19.

The Thesis

Symantec beat on revenue in the quarter. Accounting for foreign exchange and one-time costs, total revenue would have been 2 percent higher year-over-year instead of the reported 5.1 percent decline, Talpaz said in a note.

While the enterprise security business posted a revenue beat of $565 million versus the analyst's expectations of $500 million, implied billings fell by 19.6 percent when adjusted for divestitures and acquisitions. This marks a "far cry" from management's prior guidance of coming in flat year-over-year.

Management attributed the poor implied billings performance to an elongating sales cycle, which Talpaz said may be a valid reason to explain Symantec's headwinds. But at the same time, a near 20-percent decline could also be a sign of the company struggling to compete with companies like CrowdStrike, SentinelOne, Malwarebytes, Cybereason and Cylance.

A recent survey conducted by Stifel found that enterprises are shifting towards next-generation endpoint vendors in factor of legacy companies. Talpaz said this would mark a reversal from prior years when the next-generation vendors were shut out of the market and this trend appears to be now playing out and enterprises are "increasingly pushing displacement over refresh," which is likely validated by Symantec's 20 percent decline in enterprise implied billings.

Price Action

Shares of Symantec were trading lower by 10 percent at $18.80.

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