Growth Concerns Continue To Dog Check Point

Although not my favorite idea in security software (having expressed preferences for Palo Alto (PANW) and CyberArk (CYBR) in the recent past), I thought Check Point (CHKP) looked undervalued back in January even allowing for the suboptimal growth profile of this security company. Shares rose better than 15% since that last update, though the post-earnings sell-off has cut that in half and left the shares lagging Palo Alto, Fortinet (FTNT), and CyberArk (by a wide margin) since then.

Once again the key concern around Check Point is whether the company can generate enough growth, particularly now that the company is clearly sacrificing margin to pursue growth. At today’s valuation, I’m pretty ambivalent about Check Point. I believe this company would/will fare better in an economic downturn due to its large, well-established legacy customer base, but it’s tough to make money long-term in low-growth software companies and I’m not sold on the idea that Check Point has a plan in place to drive a meaningful acceleration in growth, particularly when 2018 was a strong year for the sector and Check Point didn’t really participate.

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Growth Concerns Continue To Dog Check Point