I’ve been following my Fool colleague Edward Sheldon’s thoughts on cyber-security firm Avast (LSE: AVST) recently. One broker has just lifted its target price by an impressive 38%, and that’s an eye opener.
You can imagine my surprise, then, when I saw Avast briefly heading the table of fallers Wednesday. The shares shed 10.5% in early trading, though they’re back to a 4.7% drop at the time of writing, at 459p.
That followed a weak day Tuesday too, when Avast shares lost 9% of their value, so what’s happening to this potential growth stock? It seems broker Peel Hunt came out with a ‘sell’ rating later on the day, setting its target price as low as 405p. If it’s right, we should expect the Avast price to drop by a further 11-12%.
Threat
Avast’s software is apparently installed on around 35% of Windows PCs outside of China, and it seems to have built some effective barriers to entry. Peel Hunt, however, apparently sees a threat to Avast from Microsoft‘s own cyber-safety developments, which it deems to be significant.
I might be cynical, but Microsoft really hasn’t impressed the world with its own software security in the decades it’s been operating. And I don’t see an end to the need for third-party PC security solutions any time soon.
Despite Peel Hunt’s bearish stance, the analyst consensus still suggests a strong buy. And I see a forward P/E of around 20 as a reasonable growth valuation.
I’m standing back and watching, at least until full-year results due 26 February. But I’m cautiously optimistic over Avast.
Jump
Meanwhile, I was pleased to see Crest Nicholson (LSE: CRST) shares gaining 5% the day after Tuesday’s full-year results. That’s a 12% rise in two days so far, with the price up 37% over the past year.
I’ve been enthusiastic over housebuilders for some time now, but Crest’s 12-month performance has exceeded my expectations. By comparison, shares in Taylor Wimpey (Britain’s biggest) are up 31% over 12 months, with Persimmon up 27%.
On the face of it, Crest’s results looked a little weak, with sales down 2.5% and adjusted pre-tax profit down 28%. But that was largely expected, and I’m seeing encouraging progress in the company’s strategy for future growth. Crest maintained its dividend at 33p per share after “strong cash generation and disciplined capital allocation.“
Cash
Net cash grew by 164% to £37.2m, so I think future dividends should be safe. Chief executive Peter Truscott said: “Crest Nicholson is a resilient business with a bright future. I am confident that our updated strategy will restore Crest Nicholson to being one of the UK’s leading house builders.“
The firm also believes the general election outcome should be good for the sector, and I agree. As long as we avoid a no-deal Brexit catastrophe, I can see housing demand remaining reasonably robust.
Crest Nicholson shares are on a 2020 P/E of 14, dropping to 12.5 on 2021 forecasts. With forecast dividend yields of 6.7%, I rate the stock as buy.
