On Friday, Morgan Stanley adjusted its stance on Gen Digital Inc (NASDAQ:GEN), moving its rating from Overweight to Equal-weight. Accompanying the downgrade, the firm also lowered its price target to $27.00 from the previous $28.00.
The revision reflects Morgan Stanley's perspective on the anticipated performance of Gen Digital, citing several challenges ahead for the company. According to the firm, the downgrade was driven by a combination of factors, including a deceleration in revenue growth, maximized profit margins, and the impact of persistently high interest rates on the company's considerable debt.
The firm elaborated on its decision, noting that while Gen Digital's valuation at 10 times enterprise value to next twelve months' earnings before interest, taxes, depreciation, and amortization (EV/NTM EBITDA) is not demanding, it is justified due to the expected slower growth.
The new price target of $27.00 represents a slight decrease from the previous target, indicating a tempered outlook on the stock's value. This change in the target is aligned with Morgan Stanley's expectation of a more moderate growth trajectory for Gen Digital.
In other recent news, Gen Digital's future growth prospects received a boost as Argus increased the company's share price target to $29.00 from $26.00, maintaining a Buy rating. This positive outlook is attributed to the successful integration of Avast, which positions Gen Digital as a comprehensive consumer cybersecurity platform.
The merger, completed in September 2022, is anticipated to enhance revenue and profit margins by leveraging a broadened array of consumer cybersecurity services.
In the company's recent earnings call, Gen Digital reported robust financial performance for the fourth quarter and the full fiscal year of 2024. The company achieved a total revenue of over $3.8 billion for the year, a 14% growth in USD, and highlighted the successful cost synergies following the Avast acquisition. For fiscal year 2025, Gen Digital projects revenue growth and an increase in non-GAAP EPS.
Gen Digital is also planning to grow its customer base through its wholesale partner channel and by entering new global markets. The company's strategy includes the introduction of new products, particularly AI-powered services, designed to bolster its subscription value. With a comprehensive portfolio that includes anti-malware and identity protection products, Gen Digital is striving to become a leading entity in the consumer cybersecurity space.
InvestingPro Insights
Following the recent assessment by Morgan Stanley on Gen Digital Inc, InvestingPro data provides additional context for investors considering the company's financial health and market position. With a market capitalization of $15.93 billion, Gen Digital shows a Price/Earnings (P/E) Ratio of 26.26, which adjusts to a more favorable 16.82 when looking at the last twelve months as of Q4 2024. This suggests that the company's earnings might be on a more solid foundation than the raw P/E ratio indicates.
InvestingPro data also indicates a robust gross profit margin of 80.82% for the same period, pointing to the company's efficiency in managing its cost of goods sold. Moreover, Gen Digital's revenue growth of 14.2% in the last twelve months as of Q4 2024, combined with an EBITDA growth of 22.72%, reflects a strong operational performance.
For investors looking for additional insights, InvestingPro offers more tips on evaluating company performance and potential investment opportunities. Currently, there are 20 additional InvestingPro Tips that could further guide your investment decisions. To access these tips and more valuable investment tools, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.