Can LifeLock Bounce Back?

It was a bad week for LifeLock (NYSE: LOCK  ) . The fast-growing provider of ID theft monitoring services slipped after topping off better-than-expected results with a ho-hum guidance. The stock took a nearly 10% hit on the week.  

It wasn't a bad quarter. Revenue soared 31% to $107.6 million. LifeLock has proven to be one of the more consistent growers out there, especially when eyeing its insane streak of sequential upticks. It has now posted sequential growth in revenue and subscribers for 36 consecutive quarters. 

This is naturally a great time to be catering to folks worried about having their identities stolen. It's not a matter of folks being careless anymore. Anything from walking into a Target department store for some early holiday shopping this past season to visiting popular websites where the Heartbleed exploit was in play could expose someone to a potential breach. LifeLock's product has its critics, but the allure of early detection before a breach snowballs and assistance in the restoration process keeps folks around. It scored a retention rate of 87.5% during the quarter, improving slightly from the 87.2% rate it sported a year earlier.

There are 3.22 million subscribers now counting on LifeLock to stay on top of credit reports and provide a heads-up if anyone tries to open an account in their name. The basic service costs $10 a month, but a more beefed-up platform -- LifeLock Ultimate -- sets consumers back $25 a month for deeper coverage. The basic service is fine for most folks, judging by the $10.81-a-month average that LifeLock is collecting per subscriber.

There is competition out there. Intersections (NASDAQ: INTX  ) has Identity Guard, but the company itself has been a disappointment. Revenue fell sharply last year as total subscribers plunged from 4.5 million to 2.9 million. It sees 2014 as another year with a double-digit decline in revenue. To be fair, its recruiting has suffered as stricter banking regulations find many financial institutions moving away from pushing Intersections' offerings as an add-on product. Intersections is holding up better with Identity Guard as a consumer-direct platform, something that's clearly working for LifeLock.

LifeLock's slide came after the market considered its guidance. LifeLock's outlook calls for an adjusted profit of $0.03 a share to $0.04 a share for the current quarter on $113 million to $114 million in revenue. The forecast suggests that LifeLock will be able to easily stretch its streak of sequential revenue and subscriber growth to 37 periods, but the bottom-line guidance is well short of the $0.06 a share that analysts were targeting. 

It's disappointing, sure, but the sell-off appears overdone for a company that's in the right place at the right time. Unlike Intersections, LifeLock is actually making the most of the situation. Until the sequential growth streak ends or retention rates start to buckle, the numbers validate LifeLock's model over concerns that it doesn't do enough to eradicate all forms of ID theft. The market didn't like last week's quarterly report, but it was another step in the right direction for LifeLock.

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