Why Symantec Still Looks Secure
Symantec Corporation (SYMC: NASDAQ)
By Friedman, Billings, Ramsey, ($25.04, January 6, 2005)
WE ARE UPGRADING Symantec to Outperform from Market Perform based on likely upside to earnings guidance, valuation, and strong long-run prospects as a combined company with Veritas Software.
We find the company's earnings projection of $0.99 per share for fiscal year 2006 (ending March) to be very low.
We expect those numbers will be above $1.10 for the combined company. We are looking at a company with an approximate 20% growth rate and earnings of $1.10.
[Symantec stk cht]
This would mean that the stock is trading at a price earnings relative to growth ratio of about 1.1x, making it most attractive among large software firms.
We would be aggressive buyers of the stock, fully anticipating the stock to reach our $28 price-target within a year.
We believe Symantec shares are oversold today due to an overreaction to a press release from Microsoft and competitors' negative reports on Thursday.
Microsoft announced a malicious software removal tool, which targets viruses and worms. However, despite the mention of viruses, we do not expect this to have any incremental impact to Symantec.
We believe that when the entry occurs, it will have a very gradual and mild effect on the market.
We remain unconvinced as to Microsoft security credentials, and, as a matter of fact, believe that many customers see Microsoft as the source of many security issues.
We believe that the acquisition of Veritas, though early, is a far-sighted one. Though still several years away, ultimately, the market will head in the direction of the union of security and storage management software, and Symantec/Veritas is likely to have the most competitive offering given their strong head start.
-- Nitsan Hargil |
