Gen Digital Earnings: Strong Customer Adds Coupled With Improved Profitability Mark a Solid Quarter

We are maintaining our $21 fair value estimate for no-moat Gen Digital after the firm reported a solid second quarter largely in line with our prior estimates. Along with the second-quarter results, the firm also hosted an investor day, detailing its long-term operating model and reiterating the cost synergies the firm expects to extract following its Avast acquisition in calendar 2022. While we expect Gen’s adjusted operating margin to expand over our explicit forecast, we view Gen as a no-moat business, primarily due to its presence in a commodity-like consumer security market that has limited customer switching costs. Following the earnings report, Gen’s shares are trading in the 3-star range and fairly valued.