Trend Micro (4704) AI Stock Analysis

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JP:4704 Dividends

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Trend Micro

(OTC:4704)

78Outperform

Trend Micro shows a strong financial foundation with consistent growth, robust enterprise segment performance, and strategic investments in AI. However, technical indicators suggest a lack of momentum, and the valuation appears high. The earnings call reinforced the company's strategic direction but also highlighted challenges in the consumer segment. Overall, the stock presents a solid investment opportunity with some areas for improvement.

Trend Micro (4704) vs. S&P 500 (SPY)

Market Cap

¥1.26T

Dividend Yield1.75%

Average Volume (3M)502.83K

Price to Earnings (P/E)37.0

Beta (1Y)0.76

Revenue Growth9.63%

EPS Growth233.82%

CountryJP

Employees6,869

SectorTechnology

Sector Strength46

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)258.95

Shares Outstanding140,901,610

10 Day Avg. Volume447,630

30 Day Avg. Volume502,830

Financial Highlights & Ratios

PEG Ratio0.16

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

Price to Cash Flow (P/CF)N/A

P/FCF RatioN/A

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

¥11,124.43

Price Target Upside15.14% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering4

Trend Micro Business Overview & Revenue Model

Company DescriptionTrend Micro Incorporated is a global cybersecurity company based in Tokyo, Japan. The company specializes in developing security software for servers, cloud computing environments, networks, and small to medium businesses. Its core products and services include antivirus, internet content security, and threat management solutions, designed to protect users from a wide range of threats such as malware, ransomware, and other cyber threats. With a strong focus on innovation, Trend Micro delivers advanced security solutions to help businesses and individuals protect their digital infrastructure.

How the Company Makes MoneyTrend Micro makes money primarily through the sale of its security software and services. The company generates revenue from licensing its software products to a wide range of customers, including individuals, small to medium businesses, and large enterprises. Its key revenue streams include subscription fees for its software as a service (SaaS) offerings, which provide ongoing protection and threat intelligence updates. Additionally, Trend Micro partners with major technology companies to integrate its security solutions into their platforms, expanding its reach and customer base. Professional services, such as cybersecurity consulting and support, also contribute to its revenue. The company's strategic partnerships and continuous innovation in threat detection and response technologies are significant factors that enhance its earnings potential.

Trend Micro Financial Statement Overview

Summary

Income Statement

Balance Sheet

Cash Flow

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
272.64B	248.69B	223.79B	190.36B	174.06B
	Gross Profit
207.66B	185.03B	169.50B	148.34B	135.90B
	EBIT
48.10B	32.60B	31.34B	43.64B	39.46B
	EBITDA
77.03B	60.30B	56.53B	64.54B	62.14B
	Net Income Common Stockholders
34.36B	10.73B	29.84B	38.37B	26.90B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
210.90B	299.03B	242.85B	256.80B	212.27B
	Total Assets
400.32B	492.63B	470.80B	420.46B	376.70B
	Total Debt
0.00	0.00	0.00	0.00	0.00
	Net Debt
-170.06B	-247.86B	-191.54B	-197.73B	-155.74B
	Total Liabilities
280.87B	278.21B	242.12B	199.03B	187.34B
	Stockholders Equity
119.44B	214.39B	228.66B	220.64B	188.53B
Cash Flow		Free Cash Flow
45.56B	30.87B	35.92B	36.48B	42.47B
	Operating Cash Flow
46.78B	57.23B	56.90B	55.27B	54.31B
	Investing Cash Flow
5.04B	31.00B	-67.72B	2.58B	-5.78B
	Financing Cash Flow
-130.90B	-43.43B	-30.44B	-16.45B	-21.14B

Trend Micro Technical Analysis

Technical Analysis Sentiment

Negative

Last Price9662.00

Price Trends

50DMA

10273.44

Negative

100DMA

9371.85

Positive

200DMA

8568.76

Positive

Market Momentum

MACD

-131.79

Negative

RSI

44.21

Neutral

STOCH

36.27

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4704, the sentiment is Negative. The current price of 9662 is below the 20-day moving average (MA) of 9797.90, below the 50-day MA of 10273.44, and above the 200-day MA of 8568.76, indicating a neutral trend. The MACD of -131.79 indicates Negative momentum. The RSI at 44.21 is Neutral, neither overbought nor oversold. The STOCH value of 36.27 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4704.

Trend Micro Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4704	78 Outperform	¥1.26T	37.02	19.95%	1.75%	9.63%	233.82%
4812	75 Outperform	¥407.34B	26.95		1.74%	7.04%	3.09%
9719	71 Outperform	¥1.15T	27.47		1.93%	8.34%	4.41%
2327	70 Outperform	$645.97B	22.15	12.06%	1.91%	8.45%	30.28%
4709	65 Neutral	¥30.29B	14.70		3.25%	9.30%	33.87%
4768	63 Neutral	¥1.18T	22.04	14.69%	2.36%	13.33%	12.72%
Sector *	59 Neutral	$9.97B	10.09	-6.54%	3.08%	7.41%	-11.60%

* Technology Sector Average

Performance Comparison

JP:4704

Trend Micro

9,662.00

1,847.98

23.65%

JP:4709

ID Holdings Corporation

1,927.00

521.15

37.07%

JP:4812

DENTSU SOKEN INC.

6,240.00

1,287.47

26.00%

JP:9719

SCSK Corporation

3,705.00

1,025.37

38.27%

JP:4768

Otsuka

3,150.00

65.55

2.13%

JP:2327

NS Solutions

3,556.00

1,024.15

40.45%

Trend Micro Earnings Call Summary

Earnings Call Date: Feb 18, 2025 | % Change Since: -18.46% | Next Earnings Date: May 8, 2025

Earnings Call Sentiment Neutral

The earnings call reflected a strong performance in enterprise growth and strategic AI investments, contributing to record-breaking pre-GAAP growth and profitability. However, challenges in the consumer business, particularly due to a switch in online payment processing and ongoing issues in Japan's PC market, were notable concerns. The company's focus on cost management and dividend increases were positive, yet the decline in perpetual renewable growth and headcount adjustments highlighted areas needing attention.

Highlights

Record-Breaking Pre-GAAP Organic Growth

The company observed the highest ever pre-GAAP organic growth in Q4, with net sales up by 20% year-on-year. The growth was purely organic with no impact of acquisitions, and the pre-GAAP profitability improved from 27% to 40%.

Enterprise Segment Growth

Enterprise ARR grew by 15%, with the enterprise business up 12% year-over-year, driven by the adoption of the Vision One platform. The large enterprise recurring revenue increased by 8%.

Strategic AI Investments

Significant investments in AI, including the Trend Cybertron specialized cybersecurity LLM model, were highlighted as a key part of the company's strategy to shift towards proactive cybersecurity.

Dividend Increase

The annual earnings dividend was ¥184 per share compared to ¥56 in the previous year, indicating a substantial increase when comparing on a like-for-like basis.

Successful Cost Management

Despite inflation, the total cost growth was limited to 2%, attributed to efficiencies in cloud-related expenses and outsourcing.

Lowlights

Consumer Business Challenges

The consumer business was impacted negatively by the switch from Digital River for online payments and the continued struggle in Japan's PC business.

Unrecoverable Receivables Issue

A problem with Digital River in the United States led to JPY 1.7 billion in unrecoverable accounts receivable, affecting pre-GAAP revenue.

Decline in Perpetual Renewable Growth

Perpetual renewable growth was down to single digits, indicating a slowdown in this area compared to other segments.

Headcount and Consumer Investment

A decrease in headcount from 7,400 to 6,869 was noted, and there was a mention of a need to invest more in the consumer business to drive growth, especially in anti-scam technology.

Company Guidance

In the recent call, the company reported a robust performance for the fourth quarter of fiscal year 2024, with net sales increasing by 8% and pre-GAAP net sales growing by 20% year-on-year. The operating income showed a slight decline compared to the previous quarter but remained strong with pre-GAAP profitability improving to 40% from 27% a year ago. Notably, enterprise ARR saw a 15% growth while perpetual renewables experienced single-digit growth. The company also highlighted a significant headcount reduction from 7,400 in 2023 to 6,869 in 2024, aiming to improve productivity through AI integration rather than cost-cutting measures. It plans to increase headcount and invest in AI to drive future sales growth. The consumer segment faced challenges due to issues with a payment outsourcer, resulting in a JPY 1.7 billion impact on pre-GAAP revenue. However, overall, the company achieved its highest-ever pre-GAAP organic growth without any major acquisitions. For the full year, the company reported a 10% increase in net sales, with operating income reaching JPY 60.3 billion, a 27% year-on-year increase. The fiscal year 2025 outlook anticipates growth across all regions, with EMEA and Asia expected to grow at 10%, and a 6% increase in net sales overall, despite minimal FX impact. The dividend declared is ¥184 per share, reflecting a substantial increase from ¥56 in 2023 when compared on a normalized basis.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.