On Thursday, after the closing bell, Symantec Corporation (NASDAQ:SYMC) reported Q4 earnings and gave weaker than expected forecast. The software and enterprise backup company best known for its “Norton” antivirus software seems to be at a tipping point.
With Symantec Corporation about to split itself into two companies, one being focused on security and the other being its Veritas data-storage division, SYMC stock could either shoot to the moon or crash and burn.
Before we get to why SYMC stock may go one way or the other, let’s take a look at Thursday’s earnings report.
Wall Street had expected SYMC to post revenue of $1.56 billion for the quarter after reporting $1.65 billion last year. But, SYMC fell short of both last year’s figure and analyst’s estimates after doing just $1.54 billion during the quarter.
On the earnings side, analysts had expected per share earnings of 44 cents after posting EPS of 47 cents last year during the same time frame. But, Symantec earning per share came in at 43 cents.
Wall Street also expected SYMC to post year-end revenue of $6.55 billion and earnings of $1.89 per share, but SYMC only reported sales of $6.5 billion and EPS of $1.88. These results come after the Symantec earnings for 2014 were $1.95 per share on revenue of $6.67 billion.
Moving forward, SYMC management believes Symantec will post EPS of 41 cents to 44 cents on revenue of $1.5 billion to $1.54 billion. Wall Street had been expecting revenue of $1.62 billion and EPS of 45 cents for the current quarter.
Sales and earnings figures were down in 2015, and based on projected results for the coming quarters, it doesn’t appear SYMC management sees a whole lot of growth for Symantec. Likely, a number of reasons explain the lack of growth but mainly increasing competition and uncertainty about PC sales trends moving forward.
Competitors in the space are both small — such as Kaspersky — and large — like Intel Corporation (NASDAQ:INTC) and Microsoft Corporation (NASDAQ:MSFT) — just to name a few. Although SYMC has been in the business since 1982, information security and enterprise backup needs have really grown over the past few years making these industries big business.
The massive opportunities in the space mean that SYMC stock could take off if Symantec can cement itself as an industry leader. The problem is, since the industry represents a massive opportunity, big technology enterprise players with extremely deep pockets are trying to push their ways into SYMC’s space.
Furthermore, SYMC has relied heavily in the past on its revenue from its Norton line of products, but since that line is heavily tied to the PC, the future of its revenue streams is very uncertain. If PC sales continue to decline and mobile continues to dominate user’s time, SYMC could be in serious trouble.
Should management be successful in selling its Veritas backup storage business, it will free up time and funds to help SYMC continue to develop new products in the security business and help the business become a true industry leader.
Another area of growth could come from mobile security. Norton does already have security software for mobile devices, but consumers have not yet begun to adapt to the idea that security software is needed on mobile devices. If the masses change their thinking about mobile security, Norton could see a massive 21st century renaissance.
After looking at all the evidence though, buying SYMC stock today has too many risks. As it stands now, SYMC needs to sell its Veritas unit, develop new innovative security products and rely on consumer opinions to believe mobile security is important — just to name the big issues — in order for the stock to move dramatically higher.
When more than two “if’s” exist in an investing thesis, staying on the sideline is usually better, and that is what I recommend you do with SYMC stock.
As of this writing, Matt Thalman did not hold a position in any of the aforementioned securities. Follow him on Twitter at @mthalman5513.
