Gen Digital may not be a household name, but it boasts some well-known consumer brands in the security software sector, including Norton and LifeLock.
Rebranding itself from NortonLifeLock after its acquisition of Czech antivirus company Avast for over $8 billion in September 2022, Gen Digital is gaining attention as one of the cybersecurity industry’s hidden gems.
In a recent report, BofA Global Research analyst Jonathan Eisenson initiated coverage of Gen Digital (ticker: GEN) with a Buy rating and a $25 price target. This projection suggests a potential gain of 27% based on Wednesday’s closing price.
Eisenson argues that Gen Digital is an “underappreciated value play.” The company not only provides top-notch antivirus software but also offers a range of services focusing on malware security, identity protection, and consumer privacy. Unfortunately, many investors fail to grasp the full breadth of its offerings and potential.
The consumer cybersecurity market presents lucrative and often underrated growth opportunities. Eisenson believes that Gen Digital is well-positioned to tap into this market, which is estimated to be worth over $20 billion. With more than 435 million freemium users, the company has ample room for cross-selling and upselling its dependable solutions.
By diversifying its portfolio beyond traditional antivirus software, Gen Digital has positioned itself as a true contender in the cybersecurity industry. While its name may not be a familiar one, its ability to protect and empower consumers is garnering attention from astute investors looking for undervalued opportunities.
In conclusion, Gen Digital is a distinctive player in the cybersecurity landscape. With its robust suite of software and services, the company is primed to seize significant growth prospects in the evolving digital world. As investors begin to recognize its potential, Gen Digital may unlock immense value in the years to come.
A Positive Outlook on Gen’s Potential Growth and Debt Reduction
The analyst believes that the Avast acquisition will bring about revenue and cost synergies for Gen. Despite Gen’s high debt position affecting its valuation, the reduction of debt could potentially have a positive impact on the company’s stock.
It is worth noting that Gen raised $7.6 billion in debt to successfully finalize the Avast deal. As of the end of the September quarter, the company held $9.3 billion in long-term debt, with $629 million in cash and equivalents on hand. Currently, Gen has a market capitalization of $12.9 billion.
At present, Gen shares are trading at a relatively modest 10 times the estimated 2024 adjusted profits of $1.99 per share. This valuation is below Gen’s historical average and is partly reflective of the company’s substantial leverage. Specifically, $1.1 billion of debt is due in April 2025, while the remaining amount has varying target maturity dates between 2027 and 2030. However, considering that Gen generates over $1 billion in free cash flow annually, it will have ample resources to cover the 2025 debt maturity.
As of midday on Thursday, Gen shares were valued at $20.09, representing a 1.7% increase. The S&P 500 and the Nasdaq Composite indices, on the other hand, were both hovering near the break-even line.