Rising worries about competition for Check Point Software Technologies Ltd. (Nasdaq: CHKP) prompted Needham, which is represented in Israel by Clal Finance, to downgrade its recommendation for the share from "Buy" to "Hold". The investment house did not provide a target price, although it previously set a target price of $67, 45.5% above Check Point's current market price.
Check Point provides Internet and information security solutions. Needham analysts Scott Zeller and Elizabeth Colley believe that new competitors will enter the company's market. One of these new companies, Palo Alto Networks Inc. (Nasdaq: PANW) was founded by former Check Point executive Nir Zuk, and was recently floated on Nasdaq.
Palo Alto positions itself as a replacement for Check Point, but Check Point founder, chairman and CEO Gil Shwed seems unconcerned. In an interview with "Globes" in July, he said, "Palo Alto is a competitor, but it's still a niche player. We have better technology and we have many more customers and installations. They're an aggressive competitor, but we see that customers like our advantages."
Needham believes that Palo Alto Networks' increasing footprint may create a situation that takes away “follow-on revenue” from the existing Check Point installed base.
Palo Alto Networks is traded at a market cap of $4.27 billion, compared with $9.46 billion for Check Point.
Check Point will publish its financial report for the third quarter on Wednesday. Needham says that it sees no current difficulty at Check Point, adding that it continues to be very solid in the field. However, the analysts say that the main concern is over what will happen in 2013 or 2014, when the company will try to sell its blade offerings to its current customers. The analysts worry about the effect of Palo Alto Networks on Check Point sales to its current customers, and they therefore cut their recommendation for the share.
Credit Suisse, however, has published a very favorable recommendation for Check Point, giving it an "Outperform" recommendation with a target price of $67.50, a 46.6% premium on yesterday's market price. The Credit Suisse analysts carried out checks among Check Point's distributors, which pointed to higher sales. The analysts say that Check Point is one of their top picks among mid-cap shares they cover.
Published by Globes [online], Israel business news - www.globes-online.com - on October 15, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012