Peel Hunt starts Avast at 'sell', says stock is overvalued
By Michele Maatouk
Date: Tuesday 28 Jan 2020
(Sharecast News) - Peel Hunt initiated coverage of Avast on Tuesday at 'sell' with a 405p price target, arguing that despite the company's strengths, the shares are "overvalued" at the current price.
The broker noted that Avast is a versatile cybersecurity company whose software is on about 35% of PCs worldwide, outside of China.
"Its scale has given it a solid moat and exceptional margins. It also has steady and growing revenue streams," it said.
However, it said that in the long run, Avast is facing existential threats. It pointed to Microsoft's native cybersecurity, which is now proving to be a serious challenger and said there may not be room for Avast in a world moving towards cloud-based services.
Peel Hunt's base case scenario is that Avast for the most part fends off threats from cloud computing and Windows Defender.
"Avast is able to do this because it continues to provide a broader offering of security and ancillary services," it said.
"Additionally, current users remain with Avast because they have built up trust with the brand. Avast is also generally able to integrate into the new cloud environment."
At 1340 GMT, the shares were down 4.3% at 507p.
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