Symantec Corporation is one of the technology companies that demonstrated remarkable share price performance in the last six months. The stock has surged roughly 20.6%, outperforming the Zacks categorized Computer-Software industry’s gain of 12% in the same time frame.
What’s Driving the Stock?
We believe that the company’s restructuring initiatives, which include divestment of certain assets and acquisitions, have reinstated investors’ confidence in the stock. Notably, over the last several quarters, Symantec’s top and bottom line were under pressure due to persistent weakness in PC sales, which particularly hurt its core Norton Anti-virus software business. Apart from this, intensifying competition from Palo Alto Networks (PANW - Free Report) , FireEye Inc. (FEYE - Free Report) and Check Point Software (CHKP - Free Report) eroded its market share in the enterprise segment.
To counter the downside, the company singularly focused on restructuring its business. In doing so, on Jan 29, 2016, Symantec closed the sale of the Veritas business to Carlyle Group for $7.4 billion. We believe that the deal provided Symantec with much needed funds to continue expanding its product portfolio as well as its presence in the fast growing markets.
Symantec also completed the acquisition of Blue Coat, which will enable it to reduce its dependence on the PC market and strengthen its position in the enterprise security space. Revenues from the enterprise security segment are now expected to contribute 62% to the company’s top line.
We expect these restructuring initiatives and acquisitions to contribute significantly to this cybersecurity stock’s overall growth.
It should be noted that the company has posted impressive results in back-to-back quarters. For the last reported quarter, the company posted in-line earnings while revenues surpassed the Zacks Consensus Estimate. We were also encouraged by the company’s overall performance as it exceeded the guidance on all metrics.
Further, Symantec’s guidance for the full year as well as third quarter were encouraging wherein it expects strong revenue and margin improvements.
Going ahead, investment in growth areas such as Enterprise Backup, Storage Management and Security businesses are expected to boost Symantec’s long-term prospects. Moreover, restructuring initiatives and synergies from acquisitions are expected to support its bottom line.
Symantec currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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