Fundies Capital: Lifelock Inc (NYSE:LOCK): arguing against the short case and showing why the business is misunderstood and undervalued
From a presentation in late June regarding Lifelock Inc (NYSE:LOCK): arguing against the short case and showing why the business is misunderstood and undervalued.
LifeLock: Case Of The False Identity
Sells consumer identity theft protection services via subscription
$1.25B market cap – 97.7mm shares at $12.70
$191mm in cash, 0 debt
$1,050mm Enterprise Value
3.22mm paying subs as of 3/31/2014
I Am Long ? The “Bad Stuff” Is Priced In
Shady characters run this joint
- Co-Founder is no longer affiliated with the company, and many new execs hired
- Many anchor on the FTC infraction in 2010, though it doesn’t define the company, as it doesn’t define other companies with past infractions
“Industry sources contend that [the company’s] basic service is nearly worthless”
- The product has changed from primitive beginnings. Proprietary data is valuable. Finally, consumers pay for many products in which others don’t see value
- Best?in?class churn shows Lifelock Inc (NYSE:LOCK) customers stick around once they start
“The entire industry has become commoditized”
- Pricing per subscriber has been increasing at a very healthy clip
- While many offer seemingly similar products, one is taking the lion’s share of new subscribers
Deutsche Bank analyst estimates for 2017 are unachievable
- Analyst estimates are largely noise; they don’t look at what matters
- All that really matters are the # of subs at saturation and the value of each sub, something not addressed in short thesis
A Better Cast Of Characters
- Skepticismregarding the management team
- Robert Maynard Jr.
- Two scintillating articles in the Phoenix New Times that were published in May 2007 and May 2010
- He was absolutely a shady character – but he left the company 7 years ago, in June 2007
- FTC settlement regarding deceptive product claims was in March of 2010
- Robert Maynard Jr.
- A new group now runs the show post IPO (October 2012)
- CEO Todd Davis is still there
- Two senior executives joined the team from the ID Analytics purchase in March 2012
- Many hires of senior executives in the last 2 years significantly bolster the management team, and distance LifeLock from its past
LifeLock: Arguing Against the Short Case by Harvest