AVAST (AVST) 450.6p

Gain to date: 50.8%

Original entry point: Buy at 298.8p, 16 May 2019

To call the recent rally for IT security firm Avast (AVST) pronounced would be an understatement. The stock has jumped by two thirds in a month since hitting pandemic panic lows of 270.6p in March, sparking a big paper profit recovery for our original  investment pitch.

Driving that rapid recovery is a market mood buoyed by an impressively stable first quarter, with a 3.1% increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to $121.2m.

That was on $213.1m revenue, 6.5% ahead once the defunct Jumpshot business is excluded and currency oscillations are flattened out, implying 56.9% margins, up on 2019’s 55.3%. It also committed to pay the $0.10 per share 2019 final dividend.

Avast saw freemium-to-paid conversion rates and billings accelerate for its desktop solutions as customers increasingly worked from home, although weaker advertising rates came as no surprise. Mobile security sales are still very slow though.

A robust balance sheet is comfortably within banking covenants, with more than $1bn of borrowing capacity available.

SHARES SAYS: Avast remains a robust business but slow mobile progress continues to grate. This is a sensible time to crystallise those paper profits into hard cash. Sell.

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