LifeLock Inc. (NYSE: LOCK) is in the midst of a lawsuit with the Federal Trade Commission (FTC). The stock has taken a hit, but there is always the chance for a turnaround. Perhaps the FTC should focus on the security measures of the office personnel and management (OPM).

On Tuesday, the FTC filed suit against LifeLock for not fulfilling its obligations under the 2010 settlement, and it has asked the court for full redress of all consumers affected by the violation.

Merrill Lynch reiterated a Buy rating for LifeLock and a price objective of $12, and it issued some commentary. Namely, while investor concern has primarily been about the possible monetary impact, perhaps the larger impact is if the lawsuit affects the future growth prospects of the company. While the 2010 settlement appears to have had a minimal effect on the growth rate of the company, the firm noted that the environment today is more actively competitive, within an age of pervasive social media in a space that requires consumer trust.

Without actual customer data being compromised, Merrill Lynch views this impact as relatively limited, but the situation may open the door in the medium-term to competitors wanting to capitalize on taking market share. Overall, it sees this as an incremental negative that offsets the broader industry tailwinds.

LifeLock issued a statement in response on Tuesday:

Importantly the FTC is not seeking any relief that would change LifeLock services and products going forward. The claims raised by the FTC are all related to the past, not to current business practices…

As required by the FTC’s consent order in 2010, LifeLock hired highly-credentialed, independent professionals to assess its information security. We are committed to maintaining high standards and to continual improvement, and we have spent thousands of hours and millions of dollars to achieve those standards in full compliance with the order. Every audit completed by those third parties affirmed that we were in compliance.

The company lost nearly half of its value on Tuesday after the FTC went after the company again, falling 49% to a new low of $8.15. Other analysts had this to say: LifeLock was downgraded to Hold from Buy and the price target was cut to $9.25 from $20 at Wunderlich. It was downgraded to Sector Perform and the target was cut to $11 from $20 at RBC, and was it downgraded to Sector Weight from Overweight at KeyBanc Capital Markets.

Shares of LifeLock were up 7.4% at $8.75 on Wednesday morning. The stock has a consensus analyst price target of $21.25 and a 52-week trading range of $8.39 to $19.15.

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