Check Point Software Offers An Interesting Short-Term/Long-Term Tradeoff

I’ve been concerned for some time that Check Point Software (CHKP) just isn’t built to outperform, as I believe the company has pushed its “fast follower” strategy as far as it can go and risks ongoing erosion in the business. While the business still generates impressive levels of free cash flow, it’s tough to beat the market with low-growth software stocks, and Check Point has a decade-plus record of underperforming not only the security software sub-sector, but the S&P 500 overall.

I don’t like Check Point as a long-term holding, but I do feel better about the near-term outlook for the stock. The shares look priced for a double-digit return at today’s level, and strength in products like CloudGuard and Infinity may be able to shift sentiment a little more favorably. In this case, though I would view this as more of a trade, as I still have issues with the company’s competitive position over the longer term.

 

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Check Point Software Offers An Interesting Short-Term/Long-Term Tradeoff