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Check Point Looks Promising: Should You Buy the Stock?
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Shares of Check Point Software Technologies Ltd. (CHKP - Free Report) have been on the rise since it reported splendid third-quarter 2016 results. The indicators of a stock’s bullish run include a rise in its share price and a continued uptrend in estimates.
Rising Share Price
Check Point has been clocking solid returns over the last six months and has gained approximately 11.3%, outperforming the Zacks categorized Computer-Software industry’s gain of 10.2%.
Upward Estimate Revisions
In the last 60 days, the Zacks Consensus Estimate for Check Point’s fourth quarter and fiscal 2016 witnessed upward revisions. For the fourth quarter, the Zacks Consensus Estimate is currently pegged at $1.15 per share, up from earnings of $1.14 per share earlier. Similarly, the Zacks Consensus Estimate for fiscal 2016 is currently pegged at $4.14 per share compared with $4.13 projected 60 days ago.
Earnings Discussion
Check Point reported its quarterly numbers on Oct 31, following which its shares have gained over 6% so far. Check Point’s adjusted earnings per share (including stock-based compensation but excluding amortization of intangible assets) of $1.01 beat the Zacks Consensus Estimate of 97 cents. Adjusted earnings also climbed 7.2% on a year-over-year basis, driven mainly by higher revenues and a lower share count, which were partially offset by higher operating expenses.
Third-quarter revenues came in at $427.6 million, up nearly 6% year over year, and beat the Zacks Consensus Estimate of $423 million. The figure was also close to the upper end of the company’s guidance range of $405−$435 million (mid-point $420 million).
Top-line growth was aided by sales growth of 9.6% in Products & Software Blades and 1.6% in Software Updates and Maintenance. The company also reported a 23.8% surge in subscription revenues at Software Blades.
Check Point witnessed higher demand for data center and high-end appliances. Another factor contributing to overall growth was the increased number of large deal signings. The number of new customers who signed deals worth $1 million or more was 65. Customers who signed deals worth $50,000 and more contributed 73% to the total order value.
Other Driving Factors
We believe that Check Point Software will continue to benefit from strong demand for cybersecurity solutions. Note that the financial well-being, brand image and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.
With rapid technological advancement, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
Per IDC’s report, corporate spending on threat intelligence security services will reach $1.4 billion in 2018 from an estimated $905.5 million in 2014. Another research firm, MarketsandMarkets, projects that the global threat intelligence security market will reach approximately $5.86 billion by 2020 from $3.0 billion in 2015, representing a compound annual growth rate (CAGR) of 14.3%.
We believe Check Point Software is capitalizing on this opportunity and this may well be reflected in the company’s results in the to-be reported quarter.
Furthermore, the rapid adoption of Check Point’s data center appliances and the continuous enhancements in data center product lines are expected to provide adequate support to revenue growth. Additionally, the company’s continuous share buybacks bode well for investors.
Bottom Line
Looking at these positives, we believe that Check Point is one technology stock that deserves a place in investors’ portfolio.
Check Point also delivered positive earnings surprises in three out of the last four quarters with an average beat of 3.55%.
Check Point is currently trading at a lower price/earnings (P/E) multiple than the industry average. Therefore, we believe that Check Point with its lower forward P/E valuation of 20.7x compared with the industry average of 37.5x may be a great bet.
However, we believe that there is still much momentum left in this Zacks Rank #1 (Strong Buy) stock, which is quite evident from its long-term earnings growth rate of 10.1%.
Thus, investing in this stock can reap returns in the short term.
Broadcom, Seagate and Western Digital have a long-term expected EPS growth rate of 13.59%, 8.79% and 1.76, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Check Point Looks Promising: Should You Buy the Stock?
Shares of Check Point Software Technologies Ltd. (CHKP - Free Report) have been on the rise since it reported splendid third-quarter 2016 results. The indicators of a stock’s bullish run include a rise in its share price and a continued uptrend in estimates.
Rising Share Price
Check Point has been clocking solid returns over the last six months and has gained approximately 11.3%, outperforming the Zacks categorized Computer-Software industry’s gain of 10.2%.
Upward Estimate Revisions
In the last 60 days, the Zacks Consensus Estimate for Check Point’s fourth quarter and fiscal 2016 witnessed upward revisions. For the fourth quarter, the Zacks Consensus Estimate is currently pegged at $1.15 per share, up from earnings of $1.14 per share earlier. Similarly, the Zacks Consensus Estimate for fiscal 2016 is currently pegged at $4.14 per share compared with $4.13 projected 60 days ago.
Earnings Discussion
Check Point reported its quarterly numbers on Oct 31, following which its shares have gained over 6% so far. Check Point’s adjusted earnings per share (including stock-based compensation but excluding amortization of intangible assets) of $1.01 beat the Zacks Consensus Estimate of 97 cents. Adjusted earnings also climbed 7.2% on a year-over-year basis, driven mainly by higher revenues and a lower share count, which were partially offset by higher operating expenses.
Third-quarter revenues came in at $427.6 million, up nearly 6% year over year, and beat the Zacks Consensus Estimate of $423 million. The figure was also close to the upper end of the company’s guidance range of $405−$435 million (mid-point $420 million).
Top-line growth was aided by sales growth of 9.6% in Products & Software Blades and 1.6% in Software Updates and Maintenance. The company also reported a 23.8% surge in subscription revenues at Software Blades.
Check Point witnessed higher demand for data center and high-end appliances. Another factor contributing to overall growth was the increased number of large deal signings. The number of new customers who signed deals worth $1 million or more was 65. Customers who signed deals worth $50,000 and more contributed 73% to the total order value.
Other Driving Factors
We believe that Check Point Software will continue to benefit from strong demand for cybersecurity solutions. Note that the financial well-being, brand image and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.
With rapid technological advancement, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
Per IDC’s report, corporate spending on threat intelligence security services will reach $1.4 billion in 2018 from an estimated $905.5 million in 2014. Another research firm, MarketsandMarkets, projects that the global threat intelligence security market will reach approximately $5.86 billion by 2020 from $3.0 billion in 2015, representing a compound annual growth rate (CAGR) of 14.3%.
We believe Check Point Software is capitalizing on this opportunity and this may well be reflected in the company’s results in the to-be reported quarter.
Furthermore, the rapid adoption of Check Point’s data center appliances and the continuous enhancements in data center product lines are expected to provide adequate support to revenue growth. Additionally, the company’s continuous share buybacks bode well for investors.
Bottom Line
Looking at these positives, we believe that Check Point is one technology stock that deserves a place in investors’ portfolio.
Check Point also delivered positive earnings surprises in three out of the last four quarters with an average beat of 3.55%.
Check Point is currently trading at a lower price/earnings (P/E) multiple than the industry average. Therefore, we believe that Check Point with its lower forward P/E valuation of 20.7x compared with the industry average of 37.5x may be a great bet.
However, we believe that there is still much momentum left in this Zacks Rank #1 (Strong Buy) stock, which is quite evident from its long-term earnings growth rate of 10.1%.
Thus, investing in this stock can reap returns in the short term.
Other Stocks to Consider
Stocks worth consideration in the broader technology sector include Broadcom Limited (AVGO - Free Report) , Seagate Technology plc (STX - Free Report) and Western Digital Corporation (WDC - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Broadcom, Seagate and Western Digital have a long-term expected EPS growth rate of 13.59%, 8.79% and 1.76, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>