Credit Suisse says that Check Point Software Technologies Ltd. (Nasdaq: CHKP) is one the most compelling companies among its peers, based on the company's blade strategy as a driver for multiyear growth.
Credit Suisse analyst Philip Winslow reiterates his "Outperform" recommendation and target price of $67.50, saying "We believe that Check Point represents one of the most compelling mid-cap stocks in our coverage, given our thesis that the company’s blade strategy will serve as a multiyear driver for Check Point’s product growth as the installed base of Software Blade Architecture-enabled appliances continues to grow and incremental blade adoption increases, thereby enabling Check Point to not only further expand into the mid-sized business market but also to better monetize the company’s large, existing firewall/VPN installed base. Furthermore, we expect product revenue growth to reaccelerate in 2013, driving more stable pricing dynamics but slowing unit shipments versus 2012."
Winslow says that while Check Point continues to benefit from a growing pipeline for software blades and sustained high levels of unit growth, the “trading down” effect to new lower priced appliances continues to pressure average selling prices lower, and he expects revenue growth to resume only in the second quarter of 2013. He therefore thinks the company's third quarter guidance of earnings per share of $0.74-0.81 on $316-345 million revenue is achievable.
Winslow predicts that Check Point's profits and revenue will rise steadily through 2014. He predicts that it will report earnings per share of $3.19 on $1.36 billion revenue in 2012, earnings per share of $3.66 on $1.5 billion revenue in 2013, and earnings per share of $4.09 on $1.63 billion revenue in 2014.
Check Point's share price opens at $45.61 today, giving a market cap of $9.4 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on October 11, 2012
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