Symantec Stock Is Trading at an Incredible Discount Now (but Not for Long)

Symantec stock

We anticipate Symantec stock could soar as much as 100% in 2018, thanks in part to the recent acquisitions of Blue Coat Systems Inc. and LifeLock Inc.

And this is an excellent time to buy, as shares of Symantec Corp. (Nasdaq: SYMC) have pulled back about 15% from their September high, of $32.80, to today's (Tuesday) opening price of $27.91.

Symantec is also honing in on an overlooked market...

While its competitors focus on cloud and business cybersecurity solutions, Symantec is doubling down on the consumer market that its competition is overlooking.

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You see, Americans are more worried about cybersecurity threats than ever before. According to an October 2014 Gallup poll, Americans were twice as likely to be worried about having their identity hacked as they were about being mugged or having a child physically harmed at school.

In 2016, 49% of Americans believed their data was less secure than it was five years prior, according to a study by Pew Research.

And those concerns were confirmed numerous times in 2017...

On May 12, the WannaCry ransomware attack infected over 230,000 computers in more than 150 countries.

Then, on June 21, the U.S. Department of Homeland Security announced Russian hackers had interfered in the 2016 presidential election.

But worst of all was the Equifax breach, announced on Sept. 7, which compromised the credit information of more than 143 million Americans.

As more industries embrace digitalization, the frequency of these attacks will only increase. That means more demand for Symantec's products and services.

Here's why we're so sure...

When We Get Hacked, Symantec Stock Pops

When the Equifax breach news broke on Sept. 7, SYMC stock jumped 13% in the following five days. That one-day jump shows us Symantec is still a leading name when Americans think "cybersecurity." Unfortunately, those gains were quickly erased by traders happy to collect a 13% gain. But again, that pullback is an excellent buying opportunity.

The Equifax breach was one of the most invasive attacks on privacy in recent years. Americans really felt how vulnerable they were to becoming victims of the dreaded crime of identity theft.

And Social Security numbers were at the heart of the attack...

Americans are hardwired to protect their Social Security numbers. Of all the sensitive information we type into our Internet browsers, our Social Security numbers are the one thing that always give us pause. That nine-digit number is your identity. If a criminal gets that, then they can steal your identity. The Equifax breach confirmed Americans' biggest fear, and we reacted.

As more and more of our lives exist in massive data centers, the frequency of these cyberattacks on individuals will increase. In fact, over 1.9 billion records were breached in just the first half of 2017, compared to 575 million in all of 2013 - an increase of more than 230%.

People will be left with two options: swear off technology or pay to protect their identities.

Those kinds of decisions will help drive the share price growth we expect for Symantec stock in 2018...

Profits from Both Sides of the Cybersecurity Market

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Symantec classifies its operations under two segments: Consumer Digital Safety and Enterprise Security. Back in 2012, only 28.7% of the company's revenue came from its Enterprise Security segment. But as of fiscal year 2017, that number increased to 58.6%. Analysts also expect company-wide revenue to grow 21.2% in 2018.

While Symantec has grown the enterprise side of its business, it'll have to show growth on the consumer side to deliver investors share price growth.

With expected earnings per share (EPS) of $0.43 for Q3 of fiscal 2017, a positive surprise when it reports in the first week of February would send the company's stock soaring. Fortunately, Symantec has matched or exceeded EPS expectations in eight of the last nine quarters.

Plus, EPS of $0.43 would represent a 53.6% increase over the expected EPS of $0.28 in the third quarter of 2016.

Best of all, Symantec is one of the cheapest companies in its cybersecurity software peer group, according to S&P Capital IQ...

An Industry Leader That's Cheaper Than the Competition

Symantec currently has a forward price-to-earnings (P/E) ratio of 15.85. By comparison, its peer group's average forward P/E ratio is 29.45, meaning that Symantec trades at a 46.2% discount to the peer group.

Compared to its closest competitors Red Hat Inc. (NYSE: RHT), with a forward P/E of 41.25, and Fortinet Inc. (Nasdaq: FTNT), with a forward P/E of 35.72, Symantec trades at a 62% and 56% discount, respectively.

Given that valuation, it's not unreasonable to expect Symantec's share price to double in 2018.

Based on consensus expected annual earnings of $1.68 for 2018 and the peer group average forward P/E of 29.45, Symantec's shares would be worth $49.50 next year, which represents a 76.8% upside.

Using Fortinet's forward P/E of 35.72, Symantec's shares would be worth $60, representing a 114.3% upside.

Currently trading at $28, investors should wait until the company's upcoming ex-dividend date of Nov. 17 to buy shares, since its share price will be discounted by $0.15 - the amount of the quarterly dividend - on that date.

But that will probably be the last chance to buy Symantec's shares at these levels. The stock is likely to take off by the second half of January, if not sooner, because the company reports its third-quarter earnings results in the first week of February.

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