Trend Micro (4704) AI Stock Analysis

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Trend Micro

(OTC:4704)

Rating:75Outperform

Price Target:―

Trend Micro's strong financial performance is a key driver of its overall score, supported by robust revenue growth, profitability, and balance sheet stability. The earnings call provided positive insights into strategic growth areas but also highlighted challenges in the consumer segment. Valuation appears high, which could limit upside potential. Technical indicators suggest some caution in the short term, contributing to a balanced but positive outlook.

Trend Micro (4704) vs. iShares MSCI Japan ETF (EWJ)

Market Cap

$1.31T

Dividend Yield1.85%

Average Volume (3M)517.17K

Price to Earnings (P/E)40.3

Beta (1Y)0.68

Revenue Growth9.63%

EPS Growth233.82%

CountryJP

Employees6,869

SectorTechnology

Sector Strength86

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)67.46

Shares Outstanding140,901,610

10 Day Avg. Volume696,870

30 Day Avg. Volume517,173

Financial Highlights & Ratios

PEG Ratio-16.56

Price to Book (P/B)4.16

Price to Sales (P/S)0.00

P/FCF Ratio22.63

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$11,802.40

Price Target Upside18.43% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Trend Micro Business Overview & Revenue Model

Company DescriptionTrend Micro Incorporated develops and sells security-related software for computers and the Internet primarily in Japan. The company offers hybrid cloud security solutions, such conformity, workload, container, file storage, application, network, and open-source security products. It also provides intrusion prevention, threat protection, industrial and mobile network security products, as well as offers email, mobile, web, and industrial endpoint security products. In addition, the company offers cloud migration, cloud-native app development, cloud operational, data center security, and SaaS application solutions. Further, it provides ICS/OT, connected car, and 5G security solutions, as well as offers ransomware, end-of-support systems, compliance, detection, and response solutions. It serves oil and gas, healthcare, manufacturing, and electric utility industries. The company was incorporated in 1965 and is headquartered in Tokyo, Japan.

How the Company Makes MoneyTrend Micro makes money primarily through the sale of its security software and services. The company generates revenue from licensing its software products to a wide range of customers, including individuals, small to medium businesses, and large enterprises. Its key revenue streams include subscription fees for its software as a service (SaaS) offerings, which provide ongoing protection and threat intelligence updates. Additionally, Trend Micro partners with major technology companies to integrate its security solutions into their platforms, expanding its reach and customer base. Professional services, such as cybersecurity consulting and support, also contribute to its revenue. The company's strategic partnerships and continuous innovation in threat detection and response technologies are significant factors that enhance its earnings potential.

Trend Micro Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -0.69%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with significant achievements in operating profit and enterprise growth, particularly in the Vision One platform and Japan's enterprise sector. However, these were counterbalanced by challenges in the consumer division, U.S. market uncertainties, and negative impacts on pre-GAAP and recurring profit. While the company is optimistic about overcoming these challenges, the sentiment reflects both positive strides and notable hurdles.

Q1-2025 Updates

Positive Updates

Record Operating Profit and Margin Growth

Achieved a record high quarter operating profit, with a 24% increase, and improved operating profit margin. Adjusted for stock price-related remuneration, the increase was 34%.

Enterprise Division Growth

Enterprise net sales increased by 5% year-over-year, with strong performance in the large enterprise segment driving recurring revenue to USD 1.3 billion.

Vision One Platform Success

The Vision One platform saw significant adoption, with 10,600 enterprise customers transacting and 4.8 average modules deployed. The ARR for customers using Vision One was substantially higher.

Strong Japan Enterprise Performance

Japan's enterprise business saw a 305% increase in Trend Vision One net sales from new business, and a 36% year-on-year growth in customers.

Improved Cash Flow and Cost Management

Cash flow is growing nicely, and there has been a decrease in cloud costs due to more efficient usage.

Negative Updates

Consumer Division Revenue Decline

Consumer division experienced an 8% decline in net sales year-over-year due to issues with an e-commerce platform vendor going bankrupt, impacting credit card transactions.

Recurring Profit and Pre-GAAP Decline

Recurring profit decreased by 9% mainly due to exchange rate translation losses, and pre-GAAP was down 8%.

Challenges in U.S. Market

Faced headwinds in the U.S. due to government budget constraints and paused or canceled projects, impacting both government and enterprise business.

Enterprise Pipeline Concerns

Pipeline for new business is within typical metrics, but there is concern about maintaining growth amid economic uncertainties.

Impact of Multiyear Deals on Consumer Business

Reduction in multiyear deals in the consumer business aimed to improve top-line and profitability, but affected pre-GAAP results.

Company Guidance

During the first quarter of the fiscal year 2025, the company reported a 2% increase in revenue and a notably higher 24% rise in operating profit, with an operating margin reaching 22%. Despite these positive indicators, the recurring profit decreased by 9%, primarily due to a translation loss from unfavorable exchange rates. The pre-GAAP figures showed an 8% decline, attributed mainly to a 27% drop in consumer business revenue, which was impacted by issues with the e-commerce platform. The enterprise division experienced a 5% growth, while the consumer division faced an 8% decline. The enterprise segment's annual recurring revenue (ARR) saw a double-digit increase, with a substantial focus on expanding the Vision One platform. The company also highlighted a slight reduction in headcount, aiming for a more efficient and flat organizational structure. Despite macroeconomic uncertainties, the cash flow was reported to be growing, and the company's overall performance was described as in line with expectations for the full year, with a continued focus on strategic partnerships and technological advancements.

Trend Micro Financial Statement Overview

Summary

Trend Micro exhibits strong financial performance with consistent revenue and profit growth. The company's healthy profit margins and solid balance sheet with no debt underscore its financial stability. Strong cash flow management further enhances its growth potential, though there is room for improvement in net profit margins.

Income Statement

Very Positive

Trend Micro demonstrates strong financial performance with consistent revenue growth, evident from a 9.64% increase in 2024 compared to 2023. The company maintains healthy profit margins, with a gross profit margin of 76.18% and a net profit margin of 12.60% for 2024. The EBIT margin stands at 17.65%, indicating efficient operational management. These metrics highlight the company's robust profitability and growth trajectory, although the net profit margin suggests room for improvement in cost management.

Balance Sheet

Very Positive

The company maintains a solid balance sheet with no debt, showcasing financial discipline and stability. The equity ratio of 29.84% indicates a strong equity base relative to total assets. Return on Equity (ROE) is healthy at 28.76%, reflecting efficient use of shareholders' equity to generate profits. The absence of debt reduces financial risk, providing a stable foundation for future growth.

Cash Flow

Very Positive

Trend Micro has strong cash flow generation capabilities, with a free cash flow increase of 47.63% from 2023 to 2024, highlighting effective cash management and potential for reinvestment. The operating cash flow to net income ratio of 1.36 suggests robust cash flow relative to reported earnings. The company's ability to generate free cash flow consistently reinforces its financial flexibility and operational efficiency.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	274.21B	272.64B	248.69B	223.79B	190.36B	174.06B
Gross Profit	208.83B	207.66B	185.03B	169.50B	148.34B	135.90B
EBITDA	76.44B	77.03B	60.30B	56.53B	64.54B	62.14B
Net Income	32.46B	34.36B	10.73B	29.84B	38.37B	26.90B
Balance Sheet
Total Assets	362.65B	400.32B	492.63B	470.80B	420.46B	376.70B
Cash, Cash Equivalents and Short-Term Investments	196.32B	210.90B	299.03B	242.85B	256.80B	212.27B
Total Debt	0.00	0.00	0.00	0.00	0.00	0.00
Total Liabilities	258.58B	280.87B	278.21B	242.12B	199.03B	187.34B
Stockholders Equity	103.23B	119.44B	214.39B	228.66B	220.64B	188.53B
Cash Flow
Free Cash Flow	42.48B	45.56B	30.87B	35.92B	36.48B	42.47B
Operating Cash Flow	49.27B	46.78B	57.23B	56.90B	55.27B	54.31B
Investing Cash Flow	-6.55B	5.04B	31.00B	-67.72B	2.58B	-5.78B
Financing Cash Flow	-46.95B	-130.90B	-43.43B	-30.44B	-16.45B	-21.14B

Trend Micro Technical Analysis

Technical Analysis Sentiment

Negative

Last Price9966.00

Price Trends

50DMA

10415.64

Negative

100DMA

10321.43

Negative

200DMA

9295.41

Positive

Market Momentum

MACD

-197.67

Positive

RSI

38.25

Neutral

STOCH

16.08

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4704, the sentiment is Negative. The current price of 9966 is below the 20-day moving average (MA) of 10524.80, below the 50-day MA of 10415.64, and above the 200-day MA of 9295.41, indicating a neutral trend. The MACD of -197.67 indicates Positive momentum. The RSI at 38.25 is Neutral, neither overbought nor oversold. The STOCH value of 16.08 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4704.

Trend Micro Peers Comparison

Overall Rating

UnderperformOutperform

Sector (69)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4493	80 Outperform	¥17.95B	32.69		0.17%	24.15%	-7.80%
4704	75 Outperform	$1.31T	40.33	29.09%	1.85%	9.63%	233.82%
Sector *	69 Neutral	¥231.71B	14.67	7.64%	2.71%	9.09%	8.52%
SYKKF		$169.95M	14.93	14.77%	3.91%	―	―
4417	79 Outperform	¥49.47B	48.11		0.64%	25.69%	28.41%
3778	66 Neutral	¥178.71B	59.42		0.09%	43.92%	302.88%
3914	65 Neutral	¥17.67B	44.31		―	5.32%	-19.27%

* Technology Sector Average

Performance Comparison

JP:4704

Trend Micro

9,966.00

3,338.74

50.38%

SYKKF

Soliton Systems KK

9.16

1.68

22.46%

JP:3778

SAKURA Internet Inc.

4,470.00

224.34

5.28%

JP:3914

JIG-SAW INC.

2,670.00

-1,285.00

-32.49%

JP:4417

Global Security Experts Inc.

3,235.00

291.54

9.90%

JP:4493

Cyber Security Cloud, Inc.

1,770.00

-438.00

-19.84%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Apr 25, 2025