GEN - Gen Digital: Cross-Selling And Partnership Strengths But Rate-Sensitive

2024-06-14 15:40:06 ET

Summary

• This article aims to make an investment case for Gen Digital Inc. based on their cross-selling and partnership strategies as strengths compared to much larger competitors.
• At the same time, I provide an update on how the merger has boosted revenue growth and brought cost synergies.
• On the other hand, learning from the volatility it experienced post-Avast acquisition due to its high debt which also impacts net income, it is important to exercise moderation.
• Risks remain due to interest rates remaining higher for longer, but the lowering of leverage is a positive.
• It also manages a huge user base of about 500 million internationally, which they may convert using the freemium revenue model.

The last time I covered Gen Digital Inc. ( GEN ) in August 2021, it was still called Norton LifeLock, and I was bullish because of the merger opportunities after the announcement of the acquisition of Avast for $8.6 billion. The shares climbed from $26 to $30.3 in February 2022 but subsequently went through a long period of volatility as shown in the chart below, mainly due to the Federal Reserve aggressively hiking interest rates as from March. Its shares were particularly impacted because of its high leverage of 3.9 times as borrowing costs escalated, but since then, the stock has partly recouped losses and is now trading at around $25....

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