Earnings just rose 13.5% at Gen Digital

Gen Digital has shown a steady increase in its user base and accompanying revenue. It continues to innovate with high R&D spending to develop cutting-edge cybersecurity solutions.

A solid yield adds to the firm’s appeal as does the low valuation: the stock trades at just 12.2 times the company’s 2024 earnings forecast.

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GEN DIGITAL INC. (Nasdaq symbol GEN; gendigital.com) has been the new name of NortonLifeLock since November 2022.

The change follows NortonLifeLock’s September 2022 acquisition of European cybersecurity firm Avast plc for $8.1 billion. Avast, which was based in Prague but traded on the London Stock Exchange, primarily makes both free and premium security software for consumers such as desktop security, server and mobile-device protection.

Gen Digital now acts as the parent company for several security-related brands including Norton, LifeLock, and Avast, in addition to Avira, AVG, ReputationDefender and CCleaner, which were obtained in previous acquisitions.

Gen continues to attract new customers. At the end of its fiscal 2024 fourth quarter ended March 29, 2024, it had 39.1 million users, up 2.4% from 38.2 million a year earlier. Direct average revenue per user was unchanged at $7.24.

As a result, Gen’s overall revenue in the quarter rose 2.1%, to $967 million from $947 million a year earlier. Earnings before one-time items rose 13.5%, to $336 million, or $0.53 a share, from $296 million, or $0.46 a share. That beat the $0.52-a-share consensus estimate.

Growth Stocks: High R&D spending is delivering revenue-enhancing products for Gen Digital

Meanwhile, Gen continues to spend a high 8% of its revenue on research. That’s letting it develop new products to spur its long-term growth. For example, the company’s Norton subsidiary has now introduced an AI-powered mobile application and web-based service. Called Genie, it provides a way to check if texts, emails, websites and social media posts are a scam.

Powered by advanced AI, Genie draws from Norton’s continually updated databases and experience in uncovering and dealing with scams, phishing attacks and unsafe websites. Genie is targeted at swiftly evaluating the authenticity of a suspicious text message or uploaded screenshot.

Genie is also continually updated and developed by Norton to learn and adapt to detect new scams and guard against emerging threats. The program also looks to offer advice to users, flagging messages as potential scams and providing explanations, guidance and education.

AI-based solutions use machine learning algorithms to detect and respond to both known and previously unidentified malware threats. These algorithms have the capability to analyze vast volumes of data, enabling them to identify intricate patterns and anomalies that might be challenging for humans to spot.

The new product was initially only available in certain countries, but Gen has now released it globally. The company has also partnered with actor and content creator Dan Levy to promote Genie through multiple social media channels on YouTube, Facebook and Instagram.

For all of fiscal 2024, Gen will probably earn $1.96 a share, and the stock trades at an attractive 12.2 times that forecast. The shares yield 2.1%.

Recommendation in Wall Street Stock Forecaster: Gen Digital Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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