Merrill Lynch has upgraded its recommendation for Check Point Software Technologies Ltd. (Nasdaq: CHKP) from "Neutral" to "Buy" and reverted its target price back to $52 from $47, citing the 32% drop in the share price from its peak, the company's healthy balance sheet, and the launch of many new products, which will drive faster growth in the first half of 2013.
Merrill Lynch analysts Tal Liani, Ron Zembler, and Kiera Kilkowski say, "The crux of our upgrade is the expected growth acceleration early next year. Check Point refreshed its appliances earlier this year, boosting capacity threefold, yet keeping the old pricing. Customers flocked to cheaper yet more capable solutions, causing share losses and growth deceleration, but the good news is that unit growth is double digits, and 80% of appliance sales are contributed by the new portfolio, which drives us to expect the transition to end, and the growth to accelerate in early 2013."
They add that Cisco Systems Inc. (Nasdaq: CSCO) went through a similar switching cycle, which in hindsight was a great buying opportunity for the stock.
The analysts predict that Check Point will report $1.35 billion revenue in 2012, 8.1% more than in 2011, and that it will grow a further 8.7% to $1.46 billion in 2013. It predicts that non-GAAP net profit will be $621 million ($2.95 per share) in 2012, up 8.3% over 2011, and rise by a further 9.1% to $678 million ($327 million) in 2013.
Published by Globes [online], Israel business news - www.globes-online.com - on October 25, 2012
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