Key Takeaways
- Gen Digital shares jumped 13% today after its fiscal second-quarter revenue rose 12% and it raised its full-year outlook.
- Its Trust-Based Solutions segment grew 26%, and its CEO said Gen isn’t working on a big acquisition.
- MoneyLion competes with Chime and Dave for cash-advance customers, and both report on Nov. 4.
- Even after the jump, Gen trades well below its five-year average forward P/E.
Gen Digital (GEN) shares jumped 13% today on a beat-and-raise quarter.
Most of the growth came from Gen’s Trust-Based Solutions segment, which grew 26% and includes identity protection and MoneyLion’s lending and marketplace business. MoneyLion’s Instacash advances chase the same everyday customers as Chime Financial (CHYM) and Dave (DAVE), which both report on Nov. 4.
Gen’s Beat and Raise
Here’s the quarter, which ended Oct. 2:
- Revenue rose 12% to $1.37 billion, ahead of the $1.34 billion consensus.
- Non-GAAP EPS rose 19% to $0.74, ahead of the $0.72 consensus.
- Full-year revenue guidance rose to $5.47-$5.52 billion from $5.38-$5.48 billion, above the $5.44 billion consensus. EPS guidance rose to $2.93-$2.98 from $2.87-$2.97.
On the Q2 earnings call, CEO Vincent Pilette said “we are not working on a transformative acquisition today.”
That’s welcome from a company with $8.1 billion of debt. More than half of its $753 million of first-half free cash flow went back to shareholders as buybacks and dividends.
Two Businesses, Two Speeds
Cyber Safety (Norton and Avast) grew 5% to $858 million at a record 62% margin. Trust-Based Solutions grew 26% to $511 million at a 30% margin. That mix is the trade-off: the faster-growing half earns less than half the margin, which is why Gen’s non-GAAP operating margin slipped to 50.1% from 51.1% even as revenue grew 12%.
Together, they’ve kept quarterly revenue climbing, to $1.37 billion from $1.22 billion a year ago:
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A Read for Chime and Dave
MoneyLion’s small cash advances are Chime’s and Dave’s business too, and through June, both were growing fast. Chime’s revenue rose 27%, and its MyPay originations hit $4.5 billion. Dave’s ExtraCash originations rose 27% to $2.3 billion.
Their Nov. 4 reports cover the same months as Gen’s quarter, and their MyPay and ExtraCash originations will show whether demand for advances is holding up across the group. Gen didn’t give a comparable Instacash figure, so its 26% isn’t a like-for-like match for theirs.
Why Gen Digital Still Looks Cheap
Gen’s forward P/E was just 7.8x at Wednesday’s close, against a five-year average of 11x:
At today’s price, it’s about 9x. A company growing EPS 19% shouldn’t trade at a single-digit multiple, even with growth shifting to its lower-margin half. With no big deal on the table, the cash keeps flowing back to shareholders. The next test is Gen’s fiscal third-quarter revenue guidance of $1.37-$1.39 billion, and whether Trust-Based Solutions keeps growing without pulling the margin down further.
So What Is Gen Digital Stock Actually Worth?
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Disclaimer:
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