NortonLifeLock Inc: Overlooked Cybersecurity Stock Has Excellent Momentum

NortonLifeLock Inc Outlook Bullish on Q1 Revenue & Earnings Beat

NortonLifeLock Inc (NASDAQ:NLOK) is not what you’d call an under-the-radar stock. In fact, the company’s brand “Norton” is synonymous with cybersecurity.

Trading around $23.40 per share, NLOK stock is up 57% year-to-date and up 56% since hitting March lows. It’s also seriously outpacing the ETFMG Prime Cyber Security ETF (NYSEARCA:HACK), which is up 18% since the start of 2020.

Compared to some of its peers, NortonLifeLock stock’s gains in 2020 may appear modest, but it’s just getting started. The company has excellent momentum and, thanks to a string of strong financial results, the rise of cyberattacks, and growth in remote working, NortonLifeLock has a bright outlook.
 

Chart courtesy of StockCharts.com

NLOK Stock Overview

NortonLifeLock is a leading provider of cybersecurity services and solutions to 50 million consumers around the world. The firm’s subscription service platform protects devices from viruses, malware, adware, and ransomware. (Source: “Home Page,” NortonLifeLock Inc, last accessed August 27, 2020.)

NortonLifeLock’s identity theft protection provides identity monitoring, alerts, and restoration. The company also provides “Norton Secure VPN” and other consumer security solutions.

The company is actually nearing the end of its transition into a pure-play consumer company. That should be completed by the end of August.

In July, NLOK completed the sale of its Culver City, California campus for $120.0 million. The sale is another step toward the company achieving an estimated $1.5 billion in proceeds from underutilized assets. (Source: “NortonLifeLock Finalizes Sale of Culver City, California Campus,” NortonLifeLock Inc, July 27, 2020.)

With this sale, NLOK has realized $875.0 million in cumulative proceeds, with management saying the company is on its way of achieving its predicted results.

Strong First-Quarter 2021 Growth

On August 6, NortonLifeLock announced that its revenue from continuing operations for the first quarter of fiscal 2021 (ended July 3, 2020) slipped 5.5% year-over-year to $614.0 million. (Source: “NortonLifeLock Delivers Strong Growth in Q1 Fiscal 2021,” NortonLifeLock Inc, August 6, 2020.)

The year-ago quarter included revenue from ID Analytics (which NLOK sold in January 2020) and an extra week of revenue in the first quarter of fiscal 2020.

Consumer revenue was up four percent year-over-year at $614.0 million, consumer billings were up nine percent, while the average revenue per user ($9.03 per month) was up two percent.

NortonLifeLock continues to see strong consumer engagement, with a direct customer count of 20.6 million, up 416,000 year-over-year.

NortonLifeLock Inc reported first-quarter net income of $118.0 million (or $0.20 per share), compared to $26.0 million (or $0.04 per share) in the same prior-year period. Adjusted diluted earnings per share (EPS) was $0.31, a 48% increase over the diluted EPS in the same quarter of fiscal 2020.

“In our first quarter, we drove better than expected results on the top and bottom lines. We demonstrated great progress towards our goal to deliver sustained mid-single digit growth, with reported billings up 9% and customer count growing year-over-year for the first time in over 5 years,” said Vincent Pilette, CEO.

For the second quarter of fiscal 2021, the company expects to report revenue in the range of $615.0 to $625.0 million, representing growth of three to five percent (adjusted for ID Analytics revenue), and non-generally accepted accounting principles (non-GAAP) EPS in the range of $0.31 to $0.35.

Analyst Take

NortonLifeLock Inc is a streamlined company that reported strong first-quarter results and a strong outlook. Thanks to numerous sales, it’s well on its way to transforming into a pure-play consumer cybersecurity business.

On top of that, thanks to favorable trends and strong consumer demand, the company’s business outlook remains bullish. That’s good for the future of NortonLifeLock stock.