What Do McAfee’s Earnings and Risk Factors Reveal?

McAfee (MCFE) is an American cybersecurity services company. It recently restructured its operations to focus on the consumer market and completed the sale of its enterprise business. Samsung has signed McAfee on a multi-year extended deal to protect its device users.

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Let’s take a look at McAfee’s latest financial performance and risk factors.

McAfee’s Q2 Financial Results and 2021 Guidance

The company reported a 22% year-over-year increase in revenue to $467 million, exceeding consensus estimates of $433.99 million. Adjusted EPS of $0.21 beat consensus estimates of $0.18. McAfee added 556,000 net new subscribers in Q2. It now has 19.4 million direct-to-consumer subscribers, increasing from 16.6 million a year ago. (See McAfee stock charts on TipRanks).

McAfee sold its enterprise unit for $4 billion in cash. In connection with that transaction, the company plans to pay a special dividend of $4.50 per share on August 27. Moreover, it is in the process of reducing its debt by $1 billion.

For Q3, McAfee anticipates revenue in the range of $461 million – $467 million. For full-year 2021, the company expects revenue to be in the range of $1.84 billion – $1.85 billion. McAfee notes that its financial outlook is subject to certain assumptions and risks.

McAfee’s Risk Factors

The new TipRanks Risk Factors tool shows 65 risk factors for McAfee. Since December 2020, the company has amended its risk profile to introduce two new risk factors.

A newly added risk under the Finance and Corporate category relates to the sale of the enterprise business. McAfee cautions investors that there is no guarantee that it will achieve the expected benefits of the enterprise unit sale. It highlights that it will lose some employees in connection with that transaction and that the remaining employees may lose focus and seek jobs elsewhere. Additionally, it tells investors that the proceeds from the enterprise unit sale will be used to pay dividends and could adversely affect its financial growth.

Another newly added risk falls under Tech and Innovation warning investors that going forward, McAfee’s results will depend solely on the performance of its consumer business. The risk is that should there be a downturn in the consumer market, the company’s results and financial condition could be materially impacted in a negative way, which could in turn affect the stock price.

Finance and Corporate is McAfee’s top risk category, representing 43% of the total risks. That is above the sector average at 39%. McAfee shares have gained about 85% since the beginning of 2021.

Analysts’ Take

Following McAfee’s Q2 report, Piper Sandler analyst Rob Owens reiterated a Buy rating on McAfee stock but lowered the price target to $30 from $34.50. The analyst adjusted the price target to account for McAfee’s $4.50 per share special dividend related to the sale of the enterprise unit. Owens’ new price target suggests 13.68% upside potential.

Consensus among analysts is a Moderate Buy based on 3 Buys and 2 Holds. The average McAfee price target of $30.40 implies 15.2% upside potential to current levels.