On Monday, Barclays maintained its Equalweight rating on Gen Digital Inc (NASDAQ:GEN) stock, with a steady price target of $28.00. The firm's analysis highlighted four key observations regarding GEN's fiscal second quarter performance.
Firstly, Barclays projects approximately 209,000 new user additions, noting that the summer period typically sees slower growth. Additionally, the users acquired in the same quarter of the previous year are now due for renewal, potentially leading to an increase in unit churn due to lower retention rates among first-year renewals.
Barclays also pointed out the indirect benefits of declining interest rates on GEN's financials. A more favorable foreign exchange (FX) environment is expected to positively influence the average revenue per user (ARPU).
Furthermore, declining rates should reduce interest expenses, especially given GEN's recent refinancing activities and a lower Secured Overnight Financing Rate (SOFR) curve.
The firm has introduced a bookings forecast into its model and provided insights into the differences between bookings and billings. This new forecast is part of Barclays' comprehensive approach to analyzing the company's performance metrics.
Finally, Barclays noted that web traffic for both Norton and Avast, two of GEN's key products, showed year-over-year growth. Norton's traffic increased by 7% year-over-year, while Avast saw an 8% quarter-over-quarter growth.
Promotions during Labor Day, which occurred in late August and early September, as well as Bloomberg credit card data, suggest year-over-year growth in US revenue, although there might be a slight deceleration compared to the first quarter.
These observations by Barclays provide a current snapshot of Gen Digital Inc's business dynamics as the company navigates its fiscal second quarter.
In other recent news, Gen has had a strong start to the fiscal year 2025, as indicated by their first-quarter results. The company experienced a 4% year-over-year growth in cyber safety bookings and a record direct customer count of 39.3 million, an increase of 1.1 million from the previous year. Gen's earnings per share (EPS) rose by 15% to $0.53. The company also made strides in product development with the launch of Norton Ultra VPN.
In terms of revenue, Gen reported Q1 bookings at $913 million and total revenue at $965 million. The company has reaffirmed its revenue guidance for fiscal year 2025, expecting it to be between $3.89 billion to $3.93 billion. Non-GAAP EPS is projected to be between $2.17 and $2.23 per share.
These recent developments indicate a period of strong growth for Gen, with significant achievements in customer acquisition, product innovation, and financial performance. The company's focus remains on expanding cyber safety adoption and delivering digital freedom globally.
InvestingPro Insights
To complement Barclays' analysis of Gen Digital Inc (NASDAQ:GEN), recent data from InvestingPro offers additional context. GEN's market capitalization stands at $16.6 billion, with a P/E ratio of 27.99. The company's revenue for the last twelve months as of Q1 2025 was $3.83 billion, showing a growth of 7.27% over the same period. This aligns with Barclays' observations on user additions and potential revenue growth.
InvestingPro Tips highlight that GEN has maintained dividend payments for 19 consecutive years, which may appeal to income-focused investors given the current dividend yield of 1.85%. Additionally, the company's high gross profit margin of 80.65% for the last twelve months as of Q1 2025 suggests strong pricing power, potentially supporting the ARPU improvements Barclays anticipates from favorable FX conditions.
It's worth noting that InvestingPro offers 17 additional tips for GEN, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market position.
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