Check Point Software Technologies Ltd. (Nasdaq: CHKP) began yesterday's session on Nasdaq with a drop of more than 5%, but by the end of the session the share price pulled back to just a 1% decline, remaining over $100, at $103.4, which gives the company a market cap of $16.9 billion.
Check Point, run by co-founder and CEO Gil Shwed, provides cybersecurity solutions. Yesterday, it released fourth quarter financials in which it exceeded profit estimates, but provided guidance for the first quarter of 2018 that was below the analysts' consensus.
Investment bank Credit Suisse continues to rate Check Point "Neutral", with a target price of $105, 1.5% above market. The target is based on a p/e ratio of 16 for 2019.
Analyst Brad Zelnick, who takes a negative view of the cybersecurity sector because of changes affecting the industry ("firewalls are becoming the mainframes of security and warrant similar terminal multiples, and our work suggesting any cloud transition within this category is likely deflationary," he writes), describes Check Point as the "Best House on the Worst Block". He writes that the company's fourth quarter results were disappointing, and that apart from maintenance revenue, the other main revenue numbers were lower than expected, and the company's guidance for both the first quarter and full year 2018 was below the consensus estimate.
Shwed said at the press conference held by Check Point yesterday that the company had made changes in its sales network in the US, and that the results "are not where we'd like them to be, and it will take several more quarters until we see the results we want." On that, Zelnick writes, "We continue to appreciate management attributing weak performance to sales execution, and understand these transitions can take time. That said we also recognize these execution issues emanate from largely the same sales team that delivered a ‘phenomenal’ 4Q16."
"Given ‘execution issues’ beyond the broader demand environment, it seems likely competitors are taking advantage," Zelnick adds, mentioning Palo Alto Networks as one such competitor.
Published by Globes [online], Israel business news - www.globes-online.com - on February 1, 2018
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