Symantec Is on a Steady Climb

 | Aug 01, 2013 | 9:00 AM EDT
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Symantec (SYMC) jumped substantially higher on Wednesday, but is this company still worth considering from an investment perspective?

Symantec, whose most notable products include Norton antivirus software and utilities to secure data storage, had its share of glory back in 2003-2004 when it hit highs of $34.05. Since then it has traded as low as $10.05. But this has not really been a company of extremes. After its peak, Symantec pulled lower, but it has been rounding off at those lows, gradually rebuilding its strength. Over the past year it broke free from the congestion that had trapped it for many years, and it has been on a fairly steady climb ever since.

On Tuesday the software company, posted fiscal first-quarter profit that had fallen 1.9%, while revenue grew slightly. Nevertheless, the earnings beat Wall Street expectations and Symantec was one of the market's top performers on Wednesday. It posted a gain of $2.44/share, or 9.57% for the day and closed at $26.68.

Symantec (SYMC) Weekly

The company has been progressing to a subscription-based model for many of its products, as opposed to its former focus on one-time license sales. This has been cited as being a bit of a challenge for the company, but its charts suggest otherwise. Investors clearly feel that Symantec is up for the challenge and have been driving share prices higher to prove it. Analysts at R.W. Baird also agree. They gave Symantec an upgrade to outperform and raised the price target to $30 per share.

Symantec (SYMC) Monthly

Although many are questioning the fundamentals behind this one, I agree that more upside is likely given current trading action. From the fundamental side, its earnings growth is expected to come in at about 9.5% according to Wall Street expectations over the next five years. Symantec itself warned that earnings will likely top out at 44 cents a share. Nevertheless, its dividend yield of 2.5% and high rating for free cash flow production (about $1.25 billion over the past year), are still attracting interest.

Symantec (SYMC) Daily

On the technical side of things, the rounded monthly lows and shift towards increased upside momentum have now been coupled with a strong breakaway gap on the daily and weekly time frames. While I do think that $30 is possible, it will first have to contend with resistance in the zone of $28.40. This is the 100% expansion zone for the breakaway gap based on the third wave of buying on the weekly time frame. It is also the price level that broke the 2004 uptrend. This type of resistance tends to hold well, but a move into $30 would still be in that resistance zone on this larger time frame.    

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