Check Point Enjoying A Rare Tailwind, But It Won't Last

I had mixed feelings on Check Point Software Technologies (CHKP) a year ago, as I thought the shares were priced for some decent returns, but also didn’t see much going on with the business that would break it out of its prolonged doldrums where growth was concerned. Since then, the shares have basically kept pace with the S&P 500 and Palo Alto (PANW), but have been left behind by smaller players like Fortinet (FTNT), Sailpoint (SAIL) and Zscaler (ZS).

This current environment may be about as good as it can get for Check Point, with security spending holding up as an essential area where enterprises won’t look to cut costs, work-from-home driving some incremental sales opportunities, and Check Point’s large recurring revenue base providing some security at a time when there are still a lot of modeling uncertainties. I’m still worried about Check Point’s relatively modest leverage to cloud security, though, and what that could mean for margins five or 10 years down the road. The valuation isn’t bad here, but I believe near-term outperformance would be more likely driven by another wave of pessimism/fear hitting the markets.

 

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Check Point Enjoying A Rare Tailwind, But It Won't Last