Why Is NortonLifeLock (NLOK) Down 5.8% Since Last Earnings Report?

Zacks Equity Research
·3-min read

A month has gone by since the last earnings report for NortonLifeLock (NLOK). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NortonLifeLock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NortonLifeLock Q3 Earnings Beat Estimates

NortonLifeLock’s third-quarter fiscal 2021 non-GAAP earnings increased 52% from the year-ago quarter to 38 cents per share. Also, the bottom line beat the Zacks Consensus Estimate by 2.7%.

Revenues of $639 million also surpassed the consensus mark of $630 million and jumped 3% year over year. This outperformance was mainly driven by double-digit revenue growth by the company’s partner business. Strong demand, especially in Japan, for identity theft protection solutions such as dark web monitoring and ID advisor, was a positive.

Quarter Details

Direct average revenue per user (ARPU) increased 1.2% year over year to $9.10 per month. Continued stabilization of direct customer count was a positive. The company’s direct customer count increased 900,000 year over year during the fiscal third quarter, bringing the total count to 21 million.

In the reported quarter, gross profit climbed 7.2% year over year to $552 million. Moreover, gross margin expanded 310 basis points (bps) to 86.4%.

Operating income on a non-GAAP basis jumped 45.5% year over year to $326 million. Operating margin was 51%, up significantly from 36.2%.

Balance Sheet

As of Jan 1, 2021, NortonLifeLock had $1.05 billion in cash and cash equivalents, flat sequentially. Long-term debt was $3.54 billion, down slightly from the $3.56 billion witnessed in the previous quarter.

The company used cash of $293 million for operational activities.

Guidance

For the fourth quarter of fiscal 2021, NortonLifeLock projects revenues between $655 million and $665 million.

Moreover, non-GAAP earnings from continuing operations are expected between 37 cents and 39 cents per share.

Outlook for the fourth quarter includes the partial impact of Avira acquisition.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, NortonLifeLock has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise NortonLifeLock has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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