On Wednesday, Gen Digital Inc (NASDAQ: GEN), currently trading at $30.84 with a market capitalization of $19 billion, received a positive outlook from a UBS analyst, who initiated coverage with a Buy rating and set a price target of $36.00. The analyst highlighted the company's potential for double-digit earnings per share (EPS) growth compound annual growth rate (CAGR) through the fiscal year 2027. According to InvestingPro data, the stock has already demonstrated strong momentum with a 37.88% year-to-date return. This optimism is based on Gen Digital's projected topline growth, which is expected to align with the company's mid-single-digit guidance, as well as consistent operational expenditure control and an improving lifetime value to customer acquisition cost (LTV/CAC) ratio, bolstered by a more favorable interest rate environment compared to when the guidance was issued.
The analyst anticipates that Gen Digital will grow at or above the consumer cybersecurity market rate, citing the company's strong position in the identity theft protection sector. This outlook is supported by Gen Digital's impressive 80.43% gross profit margin and annual revenue of $3.86 billion. Gen Digital's significant brand awareness was also noted, with the combined Gen brands capturing approximately 50% of all industry web traffic. Furthermore, the company's expanding portfolio is seen as a key factor in its growth prospects.
According to the UBS analyst, Gen Digital's stock is attractively priced at 12 times the calendar year 2026 estimated EPS and 20 times the calendar year 2026 estimated free cash flow (FCF). Currently trading at a P/E ratio of 31.02, InvestingPro's Fair Value analysis suggests the stock is fairly valued. The analyst suggests that if the company's topline performance exceeds expectations, it could potentially support mid-teens EPS growth.
The cybersecurity market has been increasingly relevant, and Gen Digital's positioning in this sector, particularly in identity theft protection, is considered a significant advantage. The company's ability to control operational expenses while improving key financial ratios is expected to contribute to its financial strength and market performance in the coming years. InvestingPro's analysis awards Gen Digital a "GOOD" Financial Health Score of 2.98, with particularly strong marks in profitability metrics.
Investors and market watchers will likely keep a close eye on Gen Digital's financial progress and market performance, especially in light of the positive assessment and ambitious price target set by UBS.
In other recent news, Gen reported substantial growth in its second quarter for the fiscal year 2025. The company experienced a 5% increase in bookings, bringing the total to $964 million, and a 16% growth in earnings per share (EPS). Total (EPA:TTEF) revenue rose to $974 million, a 3% increase, with Cyber Safety revenue also seeing a 4% boost.
The company added 400,000 direct paying customers, expanding its customer base to 39.7 million. Gen's AI-powered Genie anti-scam product has also been successful, surpassing 1.6 million downloads. In light of these developments, Gen has raised its full-year revenue guidance to between $3.905 billion and $3.930 billion and EPS guidance to $2.18 to $2.23 per share.
Despite increased customer acquisition costs and minor currency impacts, Gen remains optimistic about its financial future. The company aims for 3% to 4% growth in Cyber Safety and plans to return 100% of excess free cash flow to shareholders. These are the recent developments in Gen's business operations.
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