Morningstar | Symantec Looks to Recover in Fiscal 2020 with Management Shake-up; Maintaining FVE of $19
No-moat Symantec reported disappointing fiscal fourth-quarter results while Greg Clark stepped down as president and CEO of the firm. Enterprise results came in below guidance due to billings declining 24% year over year, faster than management expected, which we view as potentially troublesome as Symantec looks to recover lost momentum in fiscal 2020 with a new management team. While Symantec has placed itself in a difficult place in the enterprise segment, we believe operational efficiencies can create margin expansion over the long-term. We are maintaining our fair value estimate of $19 per share and after a 15% after hours decline, we now view shares as fairly valued. Within the cybersecurity market, we advise investors to look toward narrow-moat Palo Alto Networks as an investment opportunity.For the fourth quarter, Symantec saw a 2% year-over-year revenue decline in the fourth quarter, as enterprise security decreased by 2% and consumer security declined by 1%. As compared with the prior year, Symantec's full-year results included a 2% decline in revenue, a 360 basis points increase to 13.1% GAAP operating margin, and a GAAP EPS decrease to $0.05 per share from $1.70. Guidance for fiscal 2020, inclusive of an extra week in the first quarter, contains 2% revenue growth, 100 basis points increase in GAAP operating margin, and a GAAP EPS target of $0.65 at the midpoint. While we view these targets as achievable, the new management team will need to turn the enterprise business around through growing in such areas like platform-based security architecture, data loss prevention, and email security. The large slip in enterprise billings will make 2020 challenging, but we like the interim CEO's commitment to focus on the growth areas that have gained traction.
Richard Hill, a current Symantec director and former chairman and CEO of Novellus Systems, led the earnings call and will be the interim president and CEO while the company searches for a permanent CEO.
Additionally, Vincent Pilette, the CFO of Logitech was appointed to the CFO position of Symantec and will join the company later in May.
Symantec is a provider of cyber security. The company provides cyber security products, services and solutions to organizations and individuals worldwide. The company's Enterprise Security portfolio includes a mix of products, services and solutions, delivered as part of an Integrated Cyber Defense platform. The company's platform unifies cloud and on-premises security to provide threat protection and information protection across endpoints, networks, email, and cloud applications. The company also provides services, support services, and cyber security services. The company's Cyber Safety solutions from Norton LifeLock help consumers protect their devices, online privacy, identities, and home networks.
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