Credit Suisse Thinks Expectations For Symantec Are Too High, Downgrades To Neutral

Expectations for cybersecurity provider Symantec Corporation SYMC may be too high for at least one Wall Street analyst heading into the company's earnings report on Jan. 31.

The Analyst

Credit Suisse's Brad Zelnick downgraded Symantec's stock from Outperform to Neutral with a price target lowered from $36 to $30.

The Thesis

Wall Street's consensus estimate, coupled with Symantec's own guidance, are calling for a "substantial" ramp into the bottom half of 2018 but first-hand checks paint a different picture, Zelnick said in a note. For instance, the company's growth is expected to be driven primarily by the Enterprise segment but checks with over 20 value-added-res-sellers (VARs) that represent hundreds of millions of dollars worth of revenue indicates trouble ahead.

The analyst's channel dialogue found that Symantec's "platform vision" may be "compelling," but isn't resulting in incremental wallet share gains.

The combination of recently acquired Blue Coat's sales force with Symantec's represents two "culturally disparate organizations struggling to integrate."

In addition, the Blue Coat refresh isn't materializing as expected given competitive pressures.

Initial momentum around SEP14 is now waning as next-generation rivals are "chipping away" at Symantec's incumbency.

"On balance we believe the combination of lofty expectations and mixed (skewing negative) channel sentiment means turbulence may lie ahead," the analyst said.

Price Action

Shares of Symantec lost more than 3 percent to trade recently at $26.50.