Symantec remains bearish on gloomy Q1 and FY17 outlook

Data security solutions provider Symantec Corporation (SYMC) announced its fiscal 2016 fourth-quarter earnings and revenues that missed analysts’ estimates. Following the results, the shares of Symantec went downhill to record a new 12-month low of $16.14. Considering the competition and the weak fiscal 2017 first-quarter guidance provided by the company, it can be argued that the decline in the share price is far from over.

During the fiscal 2016 fourth-quarter, the mountain view-California based company reported non-GAAP revenue of $873 million, down 6% from $929 million in the similar period of fiscal 2015. The revenue estimate of analysts’ was $879 million for the fourth-quarter of fiscal 2016.

Segment wise, the license revenue fell 37% on a y-o- y basis, while the content, subscription and maintenance revenue declined 4%. Similarly, on a y-o- y basis, the consumer segment posted a 7% decrease in the fourth-quarter revenue. Furthermore, the enterprise security segment saw a 5% drop in the revenue on a y-o- y basis. It should be noted that in spite of business realignment, both the consumer and enterprise segment registered a decline in the revenue.

Symantec

For the fourth-quarter, the Norton anti-virus software developer reported a decline in the net income to $147 million or $0.22 per share, from $203 million or $0.29 per share in the year ago similar period. The Wall Street earnings estimate for the fourth-quarter was $0.23 per share.

In the fourth-quarter, the operating margin of the company decreased to 24.5%, from 31.1% in the prior-year similar quarter.

The company also gave a gloomy first-quarter and fiscal 2017 earnings and revenue outlook. For the first-quarter, the company anticipates a 3% to 6% decrease in the GAAP revenue. This amounts to revenue in the range of $865 million to $895 million in the first-quarter. The revenue estimate of analysts currently stands at $880.7 million for the first-quarter.

The company also anticipates fiscal 2017 GAAP revenue to decrease 1% to 4%. This reflects revenue between $3.49 billion and $3.58 billion for the fiscal 2017. The Wall Street revenue estimates for the fiscal 2017 is $3.52 billion.

The non-GAAP earnings per share for the first quarter are expected to be in the range of $0.24 to $0.26 per share. The analysts’ earnings estimate currently range between $0.23 per share to $0.26 per share.

The fiscal 2017 non-GAAP earnings are anticipated to range between $1.06 per share and $1.10 per share. The low and high earnings estimate of analysts is $1.03 per share and $1.10 per share respectively. The company also faces considerable competition from small enterprises such as Kaspersky. Thus, fundamentally, the stock would remain range bound with bearish bias.

Having fallen below the support level of 17.85, the share price is now on course to reach the next support at 13.90 levels. The share price is trading below the 50-day moving average, while the RSI is pointed downwards with a reading below 50.

So, considering the declining trend, a one touch put option contract should be purchased by a binary options trader. A strike price of $14 or higher would be beneficial to the trade. Finally, an expiry date between the second and third week of June is suggested for the trade.