Goldman Sachs Initiates LifeLock At Neutral, Sees M&A As Primary Upside Catalyst

Goldman Sachs’ Gabriela Borges believes, given that Lifelock Inc LOCK shares have recovered to their pre-litigation levels, “the potential for fundamental stabilization and strategic optionality/possible M&A is already reflected in valuation.”

Borges initiated coverage of the company with a Neutral rating and price target of $18.

“We view the next 12 months as a period of transition for the company, with business metrics beginning to stabilize following the settlement of the 2014 FTC litigation and an improved strategic focus on marketing and channel re-engagement under the new management team,” the analyst mentioned.

Growth Drivers

Borges believes there are three core growth drivers for LifeLock. The first growth driver is expected to be the company’s efforts to expand its reach and drive sales and marketing leverage through its partner channels.

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In fact, the analyst pointed out that management comments suggest there is potential for large enterprise deals being signed in 2017.

Secondly, Borges pointed out pricing as a growth driver, stating, “Our pricing-per-SKU revenue build suggests that introducing higher-priced plans or increasing pricing on existing plans may be less effective going forward than it has been in the past, especially given a proliferation of cheap/free competitor solutions.”

According to the analyst, the third growth driver could be consumer attitudes, with high profile breaches likely to drive the next phase of adoption.

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