UBS Upgrades Symantec, Says RemainCo Consumer Franchise Seems Undervalued

Amidst sweeping executive and strategic changes at Symantec Corporation SYMC, the market seems to have overlooked the “steadiness” of the “RemainCo” Consumer franchise, according to UBS.

The Analyst

UBS analyst Fatima Boolani upgraded Symantec from Neutral to Buy, while raising the price target from $23 to $27.

The Thesis

Symantec has closed the sale of its Enterprise business, which contributed 50% of total revenue and 10% of EBIT. The company is scheduled to report earnings on Wednesday, and “we see catalysts for investors to revisit a cleaner, more profitable, and more focused business at an attractive multiple,” Boolani said in the note.

Following the Enterprise business divestiture to Broadcom Inc AVGO, Symantec has changed its name to NortonLifeLock and its dividend yield goes to an attractive 3%.

Amid these transformational changes, investors seem to be ignoring the company’s Consumer business, which seems primed to achieve management’s target of more than $1.50 per share in earnings and over $900 million in free cash flows, the analyst mentioned.

“Now unencumbered by the distracting capital intensive Enterprise business, measured reinvestments should stabilize subscriber declines,” Boolani wrote.

She added that the company has several avenues to achieve growth in average revenue per user, as it leverages its market leading position in consumer security with greater focus.

Price Action

Shares of Symantec were up 1.45% to $23.75 at the time of publishing on Tuesday.

Related Link:

Broadcom Falls, But Analysts Optimistic Chip Demand Has Bottomed And Acquisitions Will Help