LifeLock (NYSE:LOCK)

CAPS Rating: 3 out of 5


Player Avatar MrOneHundred (30.54) Submitted: 11/28/2012 5:01:27 PM : Underperform Start Price: $8.49 LOCK Score: +6.28

Lifelock (LOCK) or Losslock: DON'T BUY THIS STOCK?!

I don't care for this company and I must say that I'm rather frustrated that 2.4 million people trust a company with a CEO who is clearly using high pressure tactics to make sales for a service that could never guarantee complete safety, not to mention services that are mostly free. According to the article "ID theft CEO who had identity stolen defends service," LifeLock only guarantees "that if something happens [to the customer], we’re going to do everything the law allows us to do to fix the problem for [them]." Do the research and anyone will find that many of the services Lifelock provides are free to citizens; they just aren't aware of that!

Why do people buy the service and who is the target audience? I presume that buyers are primarily skeptical, fearful and elderly individuals seeking security in their aging life and whom are ready to trust in a new service run by a attractive, trustworthy-looking man (CEO Todd Davis) who even has the audacity to post his own SSN saying that the service is good enough to prevent his identity from being used by others. Guess again, there are already 87 recorded attempts at identity theft with that number (one who successfully took out a payday loan with it)... bad press for a company trying to support these services.

The stock has 44% since its IPO and many analysts from Deutsche Bank, Goldman Sachs, RBC Capital, Needham & Company, Canaccord Genuity, and Bank of America have all come forward with a "Buy" or "Hold" rating. In the past, I personally placed a lot of faith in analysts ratings, but have since developed a very bitter resentment towards most analysts. Call me skeptical, but this chart looks like it has been PUMPED to a price that will be unsustainable for the next year going forward.

According to the article "CEO Gaffe of the Week: LifeLock," the need for LifeLock isn't very high. "Only 0.8% of all people fell victim to new account fraud. That small figure doesn't leave much wiggle room for LifeLock to acquire customers, so [Lifelock's] needed to use aggressive and shock advertising to lure in those users who are "on the fence."

Financially, Lifelock has a problem: With all of this campaigning to acquire new customers, the company has had "rapidly rising Customer Acquisition Costs. Through the first six months of the year, CACs were $157 per member, yet the company brought in only $9 per month in revenue from each member." The math isn't hard here; LifeLock will be bullying employees during recess for any spare lunch money just to pay of this high cost. Not to mention customer acquisition decreased in the second quarter!

Here's a prediction: As customers become wiser about the validity of this service, they will begin to rebuke the service and the company will inevitably lose money due to high acquisition costs.

Why would a company go public at a time like this. There's so much news going round about a fiscal cliff fast approaching. Even if the cliff turns out to be imaginary, there will be enough fear to hurt the market including this stock. Also, why would anyone sell there social security number? The risk is simply to high. What happens if Lifelock dies off and is no longer around to protect Todd Davis? Flee the country?

Featured Broker Partners