Symantec Corp. shares dropped Friday for their worst performance in a year as analysts slashed price targets and estimates for the security software company that turned in another poor performance and outlook and shook up its top management ranks.
Symantec SYMC, -12.67% shares dropped more than 13% to $19.18 at least check, having touched an intraday low of $17.89, for their worst day in a year, when the stock dropped 33% after the company’s year-ago fiscal fourth-quarter earnings report and internal audit. In comparison, the S&P 500 index SPX, -0.26% was down 0.5% and the tech-heavy Nasdaq Composite Index COMP, -0.50% was down 0.8%.
Not only did Symantec post an earnings miss and a disappointing outlook late Thursday but also it abruptly announced that Chief Executive Greg Clark was leaving immediately and that Chairman Richard Hill would fill the position on an interim basis. Also, Symantec named former Logitech chief financial officer Vincent Pilette as its permanent CFO.
While personal reasons were cited for Clark’s departure, many analysts took that story tongue-in-cheek given the volatile history of the company’s performance and management tenure.
Stifel analyst Gur Talpaz, who has a hold rating and a $20 price target, called referred to it as “The Game of Musical Chairs Begins Anew.”
“For those of you who have followed the Symantec story for some time, you’re likely familiar with the company’s history of changing leadership, dating back to the passing of the baton from John Thompson to Enrique Salem in 2009,” Talpaz said.
“Since then, it’s been a revolving door at the top, though Greg Clark was able to hold onto the seat for nearly three years,” Talpaz said. “As Symantec begins the search for a new top executive, we would encourage the company to find a leader who can, first and foremost, inspire some measure of confidence with both customers and partners, particularly as new competing solutions emerge at a rapid rate.”
Of the 29 analysts who cover Symantec, two have buy ratings, 24 have hold ratings, and three have sell ratings. Of those, nine lowered their price targets, resulting in an average target of $20.90.
Analysts slashed their estimates to a consensus 34 cents a share on revenue of $1.19 billion for the fiscal first quarter, from a previous consensus of 40 cents a share on revenue of $1.2 billion. For the year, the consensus dropped to earnings of $1.71 a share on revenue of $4.84 billion, from a previous $1.77 a share on revenue of $4.97 billion.
Wedbush analysts Daniel Ives, who has a neutral rating and lowered his price target to $19 from $24, said the weakness in earnings came as a surprise. Before the announcement late Thursday, Symantec shares had been up 17% for the year, slightly better than the S&P 500.
“Last night SYMC reported FY4Q earnings that saw considerable enterprise weakness on company specific demand/execution issues that will be shocker to the Street given the company appeared to turn the corner over the last few quarters and was humming in the eyes of investors until they drove into a brick wall last night,” Ives said.
Raymond James analyst Michael Turits, who has a market perform rating, said the management change was welcome.●
“Given what has been uneven performance under the former management team and what we viewed as unrealistic guidance for F20, we’re pleased the board has ‘cleared the decks’ with a new CFO, still to be named CEO, and lower, if not (given guidance to consumer acceleration and ongoing enterprise risk) completely ‘derisked’ F20 guidance in our view,” Turits said.
Jefferies analyst John DiFucci, who has a hold rating and lowered his price target to $19 from $22, said there seems to still be risk in the company’s lowered guidance.
“Notably for F20, the enterprise expectations for $2.3B to $2.4B still imply flat organic cc growth, compared to F19’s 2.5% decline, not to mention that this business segment has not grown on an organic, constant currency basis in more than five years,” DiFucci said. “Expectations for consumer growth remained the same as the prior Q, with guidance of $2.46B to $2.5B implying 3% yoy organic cc grow which is in-line with F19’s growth of 3%.”
“While it is more reasonable than the prior few Q’s expectations, we question the company’s ability to achieve such a turnaround in growth in Enterprise over the coming quarters given prior history,” DiFucci noted.
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