LifeLock Inc. (NYSE: LOCK) should be the right company that is both in the right place and at the right time. After all, this company helps consumers to directly protect themselves against identity theft and credit fraud. Shares were hit rather hard on Monday over risks tied to a Federal Trade Commission (FTC) probe that was disclosed in the company’s latest annual report. Monday’s double-digit drop in the stock seems extreme, considering that much of this data may have previously been known, but the “buyer beware” cannot be ignored.

The annual report showed that an ongoing FTC order remains ongoing. In fact, the term “FTC” appears more than three-dozen times under the company’s Governmental Regulation section of its 10-K report.

We have received an analyst report from Sterne Agee’s Robert Breza on this matter. The firm is defending LifeLock’s Buy rating and is maintaining its $26.00 price target. Breza was quoted saying:

While we have not encountered any information pointing to malpractice, we believe that recent regulatory moves, including provisions enacted by the Dodd-Frank Act and Consumer Protection Act, will place industry players to be under scrutiny. We continue to believe that the stock’s fundamentals are solid but recognize that the investigation will pressure the stock in the short term, pending details about the whistle-blower claims. Overall, we still do not expect this to alter the strong fundamentals of the company, which posted 25% subscriber growth in the most recent quarter.

Sterne Agee’s estimates are for revenues of $446.1 million in 2014 and $556.6 million for in 2015. LifeLock shares were down 9% at $19.82, but shares traded as low as $19.35 Monday morning.

LifeLock’s 52-week range is $8.31 to $22.29, and the consensus analyst price target is $26.43. We would point out that the highest analyst price target for this stock is $30.00, and the lowest target is still higher at $24.00.

Again, this reaction seems too harsh on the surface. The problem comes with a “buyer beware” (caveat emptor) warning because there is a lot of momentum behind this move. Shortly before noon, the 2.5 million shares that had traded were already about twice this stock’s full average daily volume.

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