Symantec: UBS Upgrades; Could MFE Deal Trigger A Bidder?

UBS analyst Brent Thill this morning raised his rating on Symantec (SYMC) to Buy from Neutral, while repeating his $16 target on the stock, which yesterday closed at $12.59.

Thill notes that his previous thesis on the stock has been based on weak fundamentals overpowering inexpensive valuation; but following yesterday’s news that Intel (INTC) is buying McAfee (MFE), he sees two potentially favorable scenarios for Symantec shares.

• Scenario 1: McAfee becomes less aggressive on pricing; enterprise customers choose Symantec as a “safe haven” given uncertainty related to the MFE/INTC deal, and the transaction causes distractions and MFE has execution troubles. “While we don’t believe SYMC�s go-to-market model is in great shape, [yesterday's] news should help them in the sales process going forward,” he writes.
• Scenario 2: The stock trades for 1.5x EV/revenues, a 50% discount to where Intel is buying MFE. “Management will be under pressure to unlock the seemingly unrecognized value in its own business with a possible avenue through storage asset sales,” he writes. But he also says that if valuation remains near 5-year lows, there could be a strategic buyer – his list of potential bidders includes Oracle, IBM, Cisco and Hewlett-Packard. In a takeout, he thinks the stock could fetch $20 a share.

SYMC is up 15 cents, or 1.1%, to $13.52.

.