Bearish stock to watch: NortonLifeLock Inc (NASDAQ: NLOK)

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NortonLifeLock Inc (NASDAQ: NLOK) stock fell over 2.4% on 15th May, 2020 (as of 12:14 pm GMT-4; Source: Google finance) after the company posted mixed results for the fourth quarter of FY 20. Consumer revenue had grown just 1% year-over-year in constant currency, on the back of bookings growth of 4%. For the first quarter of 2020, the company expects revenue to be in the range of $590 to $605 million, which reflects 0% to 2% growth adjusting for extra week ($44 million) and ID Analytics revenue ($14 million) in first quarter fiscal year 2020. The company expects Non-GAAP EPS to be in the range of $0.18 to $0.22 for 1Q 2021.

In addition to year-over-year bookings growth of mid-single digits, the company had increased net customer count by 46,000 sequentially. NLOK grew average revenue per users, and the company delivered industry-leading retention, while maintaining the operating profit margin over 51%, excluding the impact of stranded costs. In fiscal year 2020, the company sold the Enterprise business for $11 billion and rightsized the infrastructure functions to be leaner and nimbler taking out $1.5 billion in annual run rate cost out. The company has ended the fourth quarter with cash and short-term investments of $2.3 billion.

NLOK in the fourth quarter of FY 20 has reported the adjusted earnings per share of 26 cents. The EPS growth is driven by strong execution and the elimination of stranded costs.  The company had reported the adjusted revenue of $610 million in the fourth quarter of FY 20, beating the analysts’ estimates for revenue by 1.29%.

Meanwhile, in the fourth quarter, the total operations was burdened by approximately $60 million in stranded costs and reached 41.5% compared to 27.2% in the year ago period, which was an increase of more than 14 points, and 36.2% in the prior quarter. The company is on way to achieving the 50% post transition operating margin for the total company through the elimination of stranded costs. The company continues to service and reduce the TSAs and eliminate the positions that were linked to stranded activities.

Additionally, the company had repurchased 29 million shares in the quarter for a total of $658 million, and the company has used $1 billion thus far of the $1.6 billion share buyback authorization. The company has paid the regular dividend of $0.125 per share in the fourth quarter.

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