Symantec (SYMC) Remains Undervalued Amid Recent Gains - BTIG
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BTIG affirms its Buy rating and $28 price target on Symantec (Nasdaq: SYMC) amid post-Blue Coat merger gains, still seeing the stock as largely undervalued.
Analyst Joel Fishbien commented,
The stock is up +38% since the announcement of the Blue Coat deal on June 12th (vs. +15% for the rest of our security coverage), implying a re-rating in line with our $2.00 EPS by FY19 thesis. We still believe, though, that the market undervalues the extent of Symantec’s new, “normalized” operational profile. The next twelve months (NTM) mark the integration phase of the Blue Coat transaction, but estimates for the second twelve months (STM) imply material operating leverage (Street assumes +32% y/y op income growth vs. only +7% y/y revenue growth). We believe this “right-sized” cost structure – with an operating margin in the mid-30s – is the true barometer by which the new Symantec should be judged. By this measure, the stock still looks cheap at 7.6x EV/STM EBIT, vs. peers at 15x. A discount near term may be justified in light of pre-deal execution woes. However, we continue to believe that (with Greg Clark at the helm) the initial $550m cost savings target is conservative, and that the stock should continue to re-rate accordingly.
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