Between accelerating billings growth and high-profile cybersecurity incidents, you might think Check Point Software Technologies (CHKP) would be getting a little more benefit of the doubt. Unfortunately, that's not the case. While Check Point hasn't been a huge laggard relative to broader tech market since my last update (up around 7% versus around 11% for the NASDAQ), nor to Palo Alto (PANW), it's still underperforming and other security names like Zscaler (ZS), Fortinet (FTNT), and CrowdStrike (CRWD) have done significantly better. Pull out the comparisons to year-to-date or one-year, and it gets even worse.
I do think there is evidence of acceleration in the business, but it's still entirely fair to question whether it is enough and/or sustainable. Even with double-digit growth in subscription-based products, it seems unlikely that Check Point will be able to crack revenue growth much beyond the 3% to 4% range on a longer-term basis, and it's very tough for low-growth to get its due from a valuation standpoint. With that, while I do think that Check Point is undervalued, the company's fast-follower approach and reliance on larger corporate clients, not to mention weaker relative revenue growth outlook, aren't conducive to a higher multiple.
Read the full article at Seeking Alpha:
Low Growth Continues To Undermine The Check Point Software Story
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