According to the research data analyzed and published by Stock Apps, NortonLifeLock (NLOK) was both one of the fastest growing and best value tech stocks during the first quarter of fiscal year 2021 (FY21 Q1). Its 12-month trailing price to earnings (P/E) ratio was 3.4, one of the lowest in the tech sector.
Comparatively, other stocks that were ranked alongside NLOK, Xerox Holdings and NCR Corp. had a 3.9 and 6.3 ratio, respectively. In terms of year-on-year (YoY) earnings per share (EPS) growth, NLOK shows a remarkable increase of 375%.
According to NortonLifeLock’s FY21 Q1 results, the company delivered much stronger growth than estimated. The global leader in cyber safety reported consumer revenue of $614 million, up by 4% YoY against a consensus estimate of $598.4 million.
Non-GAAP diluted EPS had increased 48% YoY, from $0.21 to $0.31 and consumer reported billings were up 9%. The non-GAAP EPS figure surpassed the Zacks Consensus Estimate of $0.21.
Direct customer count had increased by 416,000 YoY to 20.6 million. The average revenue per user, on the other hand, was up 2.3% YoY at $9.03 monthly. It was noteworthy that this was the first time in over 5 years that the reported billing and customer count had increased YoY.
While gross profit dropped by 4.7% YoY to $528 million, gross margin increased by 80 basis points YoY to 86%.
For Q2 FY21, NortonLifeLock estimates revenue in the range of $615 to $625 million, an increase of 3% to 5%. Analysts are optimistic as the consensus estimate shifted by 36.03% following the company’s previous quarter results.
Tech Sector Up by 35.83% YTD against Russell 1000’s 4.96%
The tech sector, represented by Technology Sector SPDR ETF (XLK) has had an outstanding 2020, massively outperforming broader markets. Over the past 12-month period, the sector has gained 35.83% as of October 2020 according to Yahoo Finance. In contrast, the Russell 1000 has gained 4.96%.
Notably, it includes some of the companies with the biggest market caps globally – Facebook, Amazon, Apple, Netflix and Google (Alphabet) (FAANG stocks). The sustained outperformance of these stocks against the broader market has, in fact, been among the few constants in 2020.
During the first weekend of September 2020, the S&P 500 was 6% higher on a YTD basis. In comparison, Facebook was up by 38%, Amazon by 78%, Apple by 65%, Netflix by 59% and Alphabet by 19%.
Part of the reason for the outstanding performance of these stocks is the fact that they have prominent brand names and huge market shares. To illustrate, Google accounts for at least 92% of internet search volume globally.
On the other hand, Amazon controls around 44% of all digital sales in the US. Additionally, during Q2 2020, Amazon Web Services sales surged by 29% and AWS accounted for 57% of all operating income. Facebook has more than 3.1 billion family active monthly users and also happens to own over half of the most visited social media platforms (4 out of 7).
At least 77% of all streaming subscribers in the US view Netflix content according to eMarketer. Moreover, 37% of internet users globally use Netflix. Apple holds 46% of the US smartphone market share as of Q2 2020.
To illustrate the weight that these stocks carry, the five companies tumbled an average of 7.1% on September 3 and 4, 2020. While that may not seem like a significant loss, the effect is magnified in view of the size of their market capitalizations.
In those two days, Facebook lost $34 billion, Apple $177 billion, Amazon $83 billion, Netflix $11 billion and Alphabet $49 billion according to data from YCharts. Collectively, this amounted to $354 billion.
Investors Sell Off 11% Facebook Shares and 5% Apple Shares in Q2
However, in Q2 2020, high profile investors sold shares in FAANG stocks. According to data collected by Motley Fool from Form 13F filings at the SEC, top money managers reduced their aggregate shares in these stocks substantially.
13F filers are money managers and companies with $100 million or more in assets under management. During the period, Facebook lost 0.17% of shares from these top-tier investors as Apple lost 5.16%. Amazon was the top loser at 11% while Netflix lost 2.25% and Alphabet Class A lost 2.12% and Class C at 2.77%.
Viking Global Management (Ole Andreas Halvorsen) dumped 30% of its Amazon shares (267,000 shares) as well as 2.3 million Netfilx shares. Susquehanna International (Jeff Yas) sold off 80% of its stake in Apple (over 4 million shares) and Renaissance Technologies (Jim Simons) sold all of its 192,855 shares.