1. NortonLifeLock Inc. (NASDAQ:NLOK)
Number of Hedge Fund Holders: 43
Share Price as of October 3: $20.14
NortonLifeLock Inc. (NASDAQ:NLOK) is an Arizona-based company that delivers extensive cybersecurity solutions for customers in the United States, Canada, Latin America, Europe, the Middle East, Africa, the Asia Pacific, and Japan. NortonLifeLock Inc. (NASDAQ:NLOK)’s $8.6 billion purchase of Avast Plc is expected to create a revenue synergy opportunity of $850 million for NortonLifeLock Inc. (NASDAQ:NLOK). The projected gross margins will increase to 85.8% with the cost synergies and operating margins will climb to 43.7% in 2022 and 49.5% in 2023. It is one of the best cybersecurity stocks to invest in.
According to Insider Monkey’s data, 43 hedge funds were bullish on NortonLifeLock Inc. (NASDAQ:NLOK) at the end of the second quarter of 2022, compared to 42 funds in the first quarter. Jeffrey Smith’s Starboard Value LP is the leading position holder in the company, with 19.20 million shares worth $421.73 million.
Here is what ClearBridge Investments All Cap Value Strategy has to say about NortonLifeLock Inc. (NASDAQ:NLOK) in its Q4 2021 investor letter:
“However, not every example has a cyclical dynamic. Consumer cybersecurity company NortonLifeLock undoubtedly benefited from the COVID-19 pandemic lockdowns as sales of personal computers and time spent online skyrocketed, as did subscriptions to the company’s security products. The market has lumped Norton into the “COVID winners” bucket and embedded a substantial reduction in subscriptions going forward as the company laps its strong results from the depths of the pandemic. While these concerns are reasonable for many within the COVID winner cohort, it is not the case for Norton. Company-specific improvements in marketing and product development have been just as powerful tailwinds to subscriber growth and would have continued to carry the company’s growth through the most difficult comparisons from 2020 even without the pandemic effect. The market’s concern about tailwinds turning to headwinds is overwrought, and contrary to the decline currently embedded in the stock price, we are confident that Norton’s earnings will continue to compound. Similar to EQT and OneMain, NortonLifeLock has been actively putting its ample cash flow generation to work to crystalize upside for shareholders. In addition to strong dividends and share repurchase activity, last year Norton announced the acquisition of “freemium” competitor Avast. Already attractive from a pricing standpoint, the acquisition creates the potential to generate immense cost and revenue synergies as well as providing Norton a strong foothold outside the North American market and a broader customer acquisition funnel. Once the transaction closes in 2022, Norton will have growing free cash flow generation of $1.5 billion and a clear path to an EPS of $5, yet a resulting valuation of just 5x earnings power. Given the high-single-digit revenue growth that Avast brings to the table, we believe the continuation of a valuation this depressed for Norton is highly unlikely.”
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