Broadcom Acquiring Symantec (SYMC)? Industry Consolidation On Horizon, Says Analyst

After a rough few years, media reports indicate that Broadcom is in the process of acquiring Symantec (SYMC), with further reports indicating that the deal could be completed this week. As a result, Symantec’s stock has shot up ~15% as investors expect Broadcom to pay a premium for the company.

Symantec is an enormous company – currently valued at ~$15.5 billion – and would offer Broadcom further market share in the infrastructure software business. Broadcom’s chip business has not been succeeding recently, so it makes sense that the company is doubling down on software. However, Symantec has not been on a smooth ride over the last year. Its CEO departed suddenly, its earnings have decreased in three out of the last four quarters, and it is facing increasing competition.

Wedbush analyst Daniel Ives has not changed his Neutral rating or $19 twelve-month price target on Symantec in the wake of this news. (To watch Ives’ price target, click here)

Ives stated that “now would be the golden time for [Symantec] and its Board to finally consider a sale of the business,” as he considers Symantec to be facing “hurricane like headwinds on the horizon.” These headwinds include the struggle to successfully incorporate the acquisition of Blue Coat and the transition from a visionary founder to new leadership. It was reported in November that private equity companies were looking at Symantec as an acquisition target, but Symantec felt its prospects were very bright. The company’s management has seemingly changed their opinion after unexpected struggles over the last six months.

Ives believes that the deal will be finalized at a stock price range of $26-$28 for Symantec, implying a relatively cheap valuation that Ives thinks will satisfy Broadcom investors. This would mark Broadcom’s second major software acquisition in as many years, as Broadcom purchased CA Technologies last year for $18 billion. Ives notes that the CA deal “still remains a head-scratcher to many.” He also thinks that there is the potential for meaningful synergies and cost-cutting with this Symantec deal, and concludes that “this would make sense on paper although many questions would still remain about the overall software strategy going forward.”

Ives predicts that this acquisition will work for both parties and “lead to an aggressive period of consolidation over the next 12 to 18 months” in the software industry. TipRanks analysis of 11 analyst ratings on Symantec shows a consensus Hold rating. 2 analysts recommend buying, 8 advise to Hold, and 1 to Sell. The average price target on the stock is $20.11, which is nearly a 20% downside from the current stock price. (Click here to see SYMC’s price targets on TipRanks)

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