Symantec (SYMC) Touches 52-Week High: Should You Hold?

Shares of Symantec Corporation (NASDAQ:SYMC) hit a new 52-week high of $22.97 on Aug 15, eventually closing at $22.88. The stock has delivered a one-year return of 4.7% and a year-to-date return of 8.9%. The average trading volume for the last three months aggregated approximately 10.67M.

What is Driving the Stock Upward?

An impressive record of beating quarterly earnings expectations, an optimistic second-quarter and fiscal 2017 outlook, solid cash flows and a decent dividend yield are the factors that drove Symantec to a new high.

The company’s adjusted earnings (excluding amortization, restructuring and other one-time items but including stock-based compensation) of 23 cents per share surpassed the Zacks Consensus Estimate of 20 cents.

Although Symantec’s revenues of $884 million declined 3.1% year over year, it surpassed the Zacks Consensus Estimate of $878 million. Quarterly revenues were above the mid-point of the guided range of $865 million to $895 million (mid-point: $880 million).

According to Thomas Seifert, Symantec CFO, “Our revenue was above the mid-point of our guided range for Q1, driven by improved performance within Enterprise Security and continued in-line results from Consumer Security.”

Symantec recently completed the acquisition of Blue Coat, Inc., a leading web security solution provider, from private equity firm Bain Capital. The addition of Blue Coat is expected to enhance Symantec’s capabilities significantly. As per Symantec, the acquisition will not only provide economies of scale and bolster its existing portfolio, but will also provide necessary resources to develop solutions to “protect large customers and individual consumers against insider threats and sophisticated cybercriminals.”

Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate, which signifies a huge upward potential. Symantec currently trades at a forward P/E of 25.04x as against the industry group average of 45.40x.

With respect to earnings surprise, this Zacks Rank #3 (Hold) stock has surpassed the Zacks Consensus Estimate in three out the last four quarters with an average surprise of 6.07%.

Buoyed by better-than-expected results, the company raised its fiscal 2017 guidance and provided an encouraging second-quarter outlook.

The company updated its fiscal 2017 guidance. For fiscal 2017, Symantec now expects revenues of $4.040 billion to $4.120 billion (previously $3.49 billion to $3.58 billion). The Zacks Consensus Estimate is pegged at $4.067 billion. Non-GAAP earnings per share are now expected to be $1.08 to $1.14 (previously $1.06 to $1.10). The Zacks Consensus Estimate is pegged at 90 cents.

For the second quarter of fiscal 2017, Symantec expects revenues in the range of $960 million to $990 million (mid-point: $975 million). The Zacks Consensus Estimate is pegged at $970 million. Management expects non-GAAP earnings per share of 18 cents to 21 cents. The Zacks Consensus Estimate is pegged at 15 cents.

However, smaller companies like Kaspersky are consistently launching comparable products. These, along with competition from the likes of Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) , remain headwinds. The uncertainty over PC sales also adds to its woes.

Apart from Symantec, Synopsys Inc. (NASDAQ:SNPS) also hit a 52-week high of $56.29 yesterday.

SYMANTEC CORP Price and Consensus

SYMANTEC CORP Price and Consensus | SYMANTEC CORP Quote

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