Symantec stock downgraded en masse as analysts fret about internal audit

Symantec stock downgraded en masse as analysts fret about internal audit

Like a pc virus, the dangerous information for Symantec Corp. buyers got here all of sudden.

Shares of the cybersecurity software program firm plunged 35% in Friday morning buying and selling to place them on monitor for his or her largest one-day decline in 17 years and second-biggest loss in 29 years as a public firm. The transfer got here after administration mentioned late Thursday that the corporate’s audit committee was conducting an internal investigation into claims made by a former employee. Also hurting issues was that Symantec

SYMC, -32.56%

 issued a weaker-than-expected forecast for the present fiscal 12 months and quarter.

At least 5 analysts downgraded their rankings on Symantec’s stock, based on FactSet, and MarketWatch counted yet another who was not in FactSet’s database. Just 4 of the 30 analysts who cowl the stock fee it a purchase, whereas 23 fee it a maintain and three name it a promote, based on FactSet.

“The fog created by an internal investigation of the company led by the audit committee of the board, with no semblance of detail provided to investors, overshadows everything else in Thursday’s Q4 and FY 2018 earnings,” wrote BTIG analyst Joel Fishbein, who downgraded the stock to impartial from purchase. He was troubled by the truth that Symantec canceled analyst name backs and declined to take questions throughout the firm’s earnings name.

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Fishbein additionally pointed to the corporate’s lower-than-expected quarterly and annual outlook, which got here as considerably of a shock to him provided that Symantec appeared to be making some progress with the enterprise section of its enterprise.

“The Q1 and FY19 guidance, which imply a ~20% decline for Q1 and ~10%-11% decline for FY2019, make us wonder what, beyond accounting changes, is going on in the business,” he wrote.

Symantec’s investor relations chief mentioned at first of the corporate’s earnings name that “financial results and guidance may be subject to change based on the outcome of the audit committee investigation.”

That disclosure gave Piper Jaffray analyst Andrew Nowinski pause. “Despite the strong results, we believe this investigation creates too much uncertainty to have confidence in management’s FY19 guidance, as this could affect historical results and future demand trends,” he wrote. Nowinski downgraded Symantec shares to impartial from chubby and lowered his worth goal to $24 from $32.

MoffettNathanson analyst Adam Holt argued that tendencies already aren’t nice at Symantec and “may get much worse” because of the internal investigation. “In our experience, they generally do, especially with highly acquisitive businesses,” he wrote. Such investigations, whether or not on an internal, exterior, or SEC stage, “almost never finish completely without issue.”

Holt was additionally struck by administration commentary on the potential for merger exercise going ahead. “Given the slowing growth in the enterprise where there are questions about share losses, the longer term relevance of the proxy server and the diminishing impact of product cycles, Symantec will likely have to do more deals and possibly a bigger one,” he wrote. Holt mentioned that this considerations him given excessive multiples within the safety trade and the excessive chance potential deal could be margin dilutive.

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As for the most recent numbers, Holt calculated that short-term enterprise billings fell 15% in the newest quarter. “Our checks suggested that Symantec was pushing multi-year deals, some as long as seven years, and durations…have been propping up billings growth, which isn’t sustainable.”

Holt downgraded his ranking to promote from impartial. He has a $20 worth goal on the stock.

Symantec’s stock is now buying and selling at its lowest stage since June 2016. Shares are down 39% over the previous 12 months, whereas the S&P 500

SPX, +0.26%

 has gained 13%.

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