Check Point (Nasdaq: CHKP) shares soared 7.7% on Monday, as analysts gave a firm thumbs-up to the Internet security software company’s second quarter results.
Merrill Lynch said Check Point deserved credit for solid execution in a difficult operating environment.
“We believe Check Point’s results suggest the business has stabilized,” said Merrill analyst Scott Phillips. “However, our near-term outlook remains clouded from the overhang of anemic IT spending and fierce competitive pressure.”
Phillips cut his 2002 and 2003 estimates for Check Point, because of continuing weakness in IT capital expenditure. The analyst reduced revenue estimates for 2002 to $440.2 million from $456.9 million and for 2003 to $498.6 million from $528.1 million. Earnings per share forecasts for 2002 were cut to $1.02 from $1.06, while targets for 2003 were trimmed to $1.11 from $1.12.
“We are also encouraged by Check Point’s recently announced Hewlett Packard partnership. The scope of the partnership is far reaching and entails multiple hardware/software package configurations. We believe Hewlett Packard’s large install base could prove a fertile ground for a combined solution, particularly in 2003 once sales ramp issues are addressed,” the analyst wrote.
US Bancorp Piper Jaffray is also impressed with Check Point’s latest numbers.
Analyst C Eugene Munster said he was more positive on Check Point shares because investors were likely to view the company as a survivor in the software space. The analyst noted the results showed that Check Point was maintaining its market position.
“Conversations with Check Point premier channel partners and IT security buyers indicate that there remains a large market for high-end enterprise firewall/VPN solutions and that this market is not saturated. Spending on these solutions, however, is relatively flat and will likely remain so as long as the overall IT infrastructure environment continues to see weakness,” the analyst added
US Bancorp also cut its 2002 and 2003 estimates for Check Point, and noted that long term growth expectations were unusually absent from the company’s remarks in yesterday’s conference call.
“For the September and December quarters, we are bringing revenue estimates down to $105 million and $110 million, respectively, from $116.3 million and $122.1 million. For 2003, we are lowering estimates from EPS of $1.10 on revenue of $520.0 million, to $1.05 on $485.0 million…We are reducing our expectations for long-term revenue growth from 20% to 10%.”
Both Merrill Lynch and US Bancorp kept their ratings on Check Point shares. Merrill rated the shares “Neutral, Long Term Strong Buy”, while US Bancorp reiterated an “Outperform” rating, with a $20 price target.
Check Point shares were up another 3% at $15.37 in early trade on the Nasdaq on Tuesday.
Published by Globes [online] - www.globes.co.il - on 23 July, 2002