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NortonLifeLock: Too Good To Pass Up

Mar. 08, 2021 4:04 PM ETGen Digital Inc. (GEN)2 Comments
Kayode Omotosho profile picture
Kayode Omotosho


  • NortonLifeLock is succeeding in its strategy to outperform the growth expectations from its huge installed base of subscribers.
  • The outlook for profitability and cashflow growth has also improved.
  • The modest valuation continues to under-represent the improved business profile.

NortonLifeLock's (NLOK) strategy for improving growth and profitability is driving results ahead of plans. The fast pace of execution has improved the cash flow prospect. The forward annualized FCF target of $900M will dilute worries about NLOK's debt load. This has given management the leverage to improve NLOK's growth options given the recent acquisition of Avira and other announced growth initiatives. There are sufficient reasons to believe NLOK will outperform in the coming quarters.

Demand (Bullish)


I am positive about NortonLifeLock's growth prospect given the improved DAU/ARPU momentum and new bets to accelerate the topline.

NLOK has consistently outperformed its revenue guidance since the sale of the Symantec business. The table below highlights the steady revenue improvement.

Source: Seeking Alpha

The revenue growth has been achieved from a blend of growing direct consumer revenue and partner revenue.

Direct consumer revenue is a function of Direct ARPU (average revenue per user) and ADCC (average direct customer count).

ADCC has improved meaningfully to 20.8m in Q3'21 (up from 20.1m in Q3'20). This points to the endearing strength of the Norton brand and the success of its sales activities.

APRU has benefitted from Norton's ability to grow sales from existing users, given its expanding product portfolio and renewal to a higher price point after the first year discount. ARPU now stands at $9.1 (versus $8.99 in Q3'20).

Partner-led revenue grew to $70m (versus $61m in Q3'20). This represents a growth of 15% year-on-year.

In Q4'21, Norton expects revenue of $655 million to $665 million. The guidance represents both a q/q and y/y improvement. I expect the acquisition of Avira to be accretive to both ADCC and ARPU. I also expect NLOK's improved sales strategy and the expanding attack surface for cybercriminals to be supportive of revenue growth. As a result, I will be reiterating my bullish rating.

This article was written by

Kayode Omotosho profile picture
Kayode's strategy aligns only with businesses that have competitive moats, solid financials, good management, and minimal exposure to macro headwinds.-------------------------------------Coverage tilted towards tech stocks (IoT, Cybersecurity, Cloud, DevOps, Data management)

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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