Why LifeLock (LOCK) Is Down Today

NEW YORK (TheStreet) -- LifeLock (LOCK) was falling 9% to $19.84 Monday due to the risk of a Federal Trade Commission probe.

In a regulatory filing with the SEC the security company said that whistleblowers talked to the FTC in regards to its marketing practices. In the filing the company said "With the growing public concern regarding privacy and the collection, distribution, and use of consumer personal information, we believe we are in an environment in which there is an increased regulatory scrutiny concerning data collection and use practices and the provision and marketing of services, like ours, that seek to protect that information. We expect that kind of scrutiny to continue as the marketplace for services like ours continues to develop."

LifeLock believes that a recent increase in whistleblower claims will continue, partly due to the Dodd-Frank Act that rewards those who report wrongdoing to the SEC with cash.

The company met with the FTC on Jan. 12, 2014 at its request to discuss whistleblower claims. The company expects "to receive either a formal or informal investigatory request from the FTC for documents and information regarding our policies, procedures, and practices for our services and business activities."

Must read: Another Side of the Security Play: LifeLock

TheStreet Ratings team rates LIFELOCK INC as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LIFELOCK INC (LOCK) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Diversified Consumer Services industry and the overall market, LIFELOCK INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 29.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LOCK has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
  • LIFELOCK INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, LIFELOCK INC increased its bottom line by earning $0.53 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 15.1% in earnings ($0.45 versus $0.53).
  • You can view the full analysis from the report here: LOCK Ratings Report

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