Symantec ( SYMC ) is the leader in the security software market and competes with McAfee ( MFE ) (recently acquired by Intel ( INTC )), Computer Associates, AVG, TrendMicro and Kaspersky Labs. Symantec recently released a report in which it noted that cyber attack tool kits have become more accessible and much easier to use. This report followed incidents in December in which credit card giants Visa and MasterCard were targeted by cyber attacks.
While such cyber attacks are dangerous for businesses and individuals, they create new business opportunities for antivirus software companies like Symantec, as demand for these products increases. We estimate that security software (for both consumers and businesses) constitutes roughly 50% of our $21.36 price estimate for Symantec stock, while storage software effectively makes up the balance. Our price estimate for Symantec stock is about 20% above the current market price.
Higher Addressable Market for Symantec
Symantec leads the consumer antivirus software market with a share of around 52%, and maintains a roughly 29% market share in the business security market. As mentioned above, an increase in sophisticated attacks is leading to higher demand for anti-virus software. We estimate that the overall consumer antivirus security market has increased from around $2.5 billion in 2005 to around $3.8 billion in 2010, and it could continue to increase to around $5.2 billion by the end of our forecast period.
Similarly, we anticipate moderate growth of the business security software market from around $5 billion in 2010 to around $7 billion by the end of our forecast period.
According Symantec's report, the relative simplicity and effectiveness of attack kits has contributed to their increased use in cybercrime. The report also gives an example of the attack kit known as Zeus, whose main objective is to steal bank account credentials. According to the report, the popularity and demand has driven up the cost of more sophisticated attack kits. For example, in 2006, WebAttacker, a popular attack toolkit, sold for $15, while in 2010, ZeuS 2.0 was advertised for up to $8,000.
Upside to Symantec
We believe that companies like Symantec stand to gain from the higher antivirus software demand, as it will lead to growth in the addressable market. To illustrate the sensitivity of Symantec's stock value to the addressable antivirus market, we estimate that growth in the consumer antivirus market towards $7 billion by the end of our forecast period (vs. our base case estimate of $5 billion) coupled with a rise in the business security software market towards $8 billion (vs. our $7 billion) would imply nearly 15% upside to our $21.36 price estimate for Symantec. We note that our price estimate currently stands about 20% above market price.