Check Point Software Garners Cautious Optimism From Analysts: Solid Revenue Growth Clashes With Market Share Concerns

Mizuho analyst Gregg Moskowitz maintained Check Point Software Technologies Ltd CHKP with a Neutral and raised the price target from $150 to $160.

The analyst noted that total fourth-quarter revenue growth of 4% Y/Y slightly exceeded consensus, as subscription revenue grew 15% Y/Y. The billings declined 1% Y/Y (vs. the Street’s flattish growth forecast), and product revenue (-9% Y/Y) remained significantly challenged. 

More positively, operating margins of 46.5% were better than expected, he said. Meanwhile, it provided a generally solid initial outlook for 2024, including revenue growth of ~6% Y/Y at the midpoint. And notably, CHKP announced a CEO succession plan, the analyst added.

More broadly, while valuation is relatively inexpensive, he noted that Check Point continues to cede market share, and the company may struggle to execute until the operating environment meaningfully improves consistently. Moskowitz projects first-quarter revenue and EPS of $600 million (prior $598 million) and $2.03, respectively.

Wedbush analyst Daniel Ives maintained Check Point with an Outperform and raised the price target from $170 to $185.

The analyst remains positive on CHKP as the company still sees cross-sell/ upsell opportunities within its install base across multiple growing cyber markets. The cyber threat landscape accelerates with AI, driving more sophisticated and constant malware activity.

Ives projects first-quarter revenue and EPS of $591.2 million (prior $593.6 million) and $2.03 (prior $1.94).

Truist analyst Joel P. Fishbein Jr. reiterated a Buy on CHKP with a price target of $175, up from $170. He said CHKP reported fourth-quarter revenues that were within company guidance but higher than consensus expectations.

The company continued to see some weakness in product revenue but noted that overall business began to see a turnaround across all geographies. The analyst flagged that it delivered solid subscription revenue driven by strength in the Harmony product family and the Infinity Platform.

Check Point issued FY24 guidance that implies a growth uptick with stable profitability and remains committed to investing to capitalize on vendor consolidation trends amidst a stabilizing macro. Fishbein Jr. projects first-quarter revenue and EPS of $599 million (prior $596 million) and $2.01.

Susquehanna analyst Shyam Patil maintained Check Point with a Positive and raised the price target from $190 to $200.

The analyst noted that Check Point reported a healthy fourth quarter, with a solid top line and further strength on the bottom line. The outlook calls for further top-line acceleration at the midpoints in the first quarter and 2024, with management pointing to the potential for upside beyond that contemplated in the guide.

Patil remains bullish on CHKP’s technological leadership and is optimistic about the potential for further top-line acceleration while maintaining or expanding margins.

KeyBanc analyst Eric Heath had a Sector Weight rating on Check Point following a mixed fourth quarter, with total revenue and subscription revenue about in line; short-term billings and EPS above consensus, but billings, product revenue, and free cash flow below.

Heath noted CHKP as fairly valued, given low visibility into a return to market growth and ongoing margin pressure. Heath projects first-quarter revenue and EPS of $592.4 million (prior $599.8 million) and $2.00 (prior $1.98).

Price Action: CHKP shares traded higher by 1.82% at $165.40 on the last check Wednesday.