Gen Earnings: No-Moat Firm Remains Laser-Focused on Profitability as Top-Line Growth Remains Weak

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm closed out its third quarter of fiscal 2024 with a top line below our estimates offset by profitability ahead of our forecasts. We appreciate the firm’s commitment to profitability during a time of macro uncertainty that has impacted demand in consumer-facing cybersecurity. While we expect Gen to incrementally expand its margins over our five-year explicit forecast, we remain pessimistic on the overall space Gen occupies as a large player in a commodity-like consumer security market. We think investors were left unimpressed by Gen’s topline growth as shares traded down sharply after hours. We view shares as fairly valued after the sell-off and would encourage investors seeking cybersecurity exposure to consider Fortinet, a wide-moat security vendor that is also trading in the three-star range.