Thursday, August 16, 2018

Could Check Point Be Looking At Improving Momentum?

The 15% move in Check Point (CHKP) shares over the last three months looks pretty good against other security stocks like Palo Alto (PANW) and Proofpoint (PFPT), but stretch the time period out to just a year and Palo Alto, Proofpoint, Fortinet (FTNT), and CyberArk (CYBR) continue to outperform Check Point by wide margins, as Check Point continues to bumble along with low single-digit revenue growth and little-to-no near-term momentum in profits or free cash flow.

Check Point’s chronic problems with top-line growth remain a sticking point with me, and I don’t find the valuation as forgiving as I did six months ago (the shares are up 13% since then, beating the NASDAQ). On the other hand, Check Point’s issues may be more cyclical than appreciated and the company may be in the early innings of a cyclical upswing that has seen annual contract values peak roughly every two years going back about a decade. The old boilerplate warning about past performance not guaranteeing future results certainly applies (particularly with the different revenue model with Infinity Total Protect), but I think this name merits a little closer watching now.

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