Goldman Sachs Reinstates Symantec At Buy, Sees 'A Compelling Case Study In Cost Optimization'

Goldman Sachs’ Gabriela Borges believes Symantec Corporation SYMC is implementing various changes to optimize its business for stable profitability, “catalyzed” by the acquisition of Blue Coat and with a new board and management team.

Borges reinitiated coverage of the company with a Buy rating and price target of $26.

“As the new margin and FCF profile come into focus, we believe Symantec’s business model will increasingly resemble large cap, value tech peers that support P/E multiples in the 15-20X range,” the analyst mentioned.

Catalysts

Borges believes Symantec’s EBIT margins and free cash flow could inflect higher over the next several quarters, as the company executes on its cost savings target of $550 million.

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In fact, the analyst believes the cost saving measure could drive free cash flow margins of 25–30 percent in the longer term.

Borges also noted that industry growth rates suggest that the company would be able to achieve normalized revenue growth of 3–5 percent.

In addition, the analyst expects Symantec’s share to remain stable on average, with further tailwind from a proxy refresh cycle in 2017.

“While we prefer to be conservative on technology synergies, both Symantec and Blue Coat have sticky installed bases and deep customer engagements that can drive stability, despite intensifying endpoint/network competition,” Borges added.

Full ratings data available on Benzinga Pro.