Check Point Saw Subdued Billings Growth In 2Q; Analysts Remain Cautious As They Expect Tougher 2H

Analysts lauded Check Point Software Technologies Ltd's CHKP Q2 beat, which faced a tough comparison versus Q2 2021 thanks to three large multi-year deals.

Credit Suisse analyst Phil Winslow had an Underperform on the stock with a price target of $115. Check Point reported Q2 results above consensus, driven by stronger-than-expected product revenue and continued demand for firewall refresh, he noted.

Billings were below consensus but against a stricter comparison from lapping three large multi-year deals in Q2 2021. While management highlighted higher costs from supply chain tightness are likely to persist into H2, price increases announced in July are to offset these costs partially, he believed. 

Despite commentary from other software peers regarding elongated deal cycles and demand weakness in Europe, network security demand trends remained robust, Winslow added.

RBC Capital analyst Matthew Hedberg had a Sector Perform rating with a PT of $145. Check Point delivered a good revenue/margin beat while billings fell short of expectations due to mega deals in Q2/21, resulting in a tough comp, he noted. 

The Q3 revenue guidance came above expectations, and FY/22 guidance was not updated given the uncertain macros, though management feels like they are trending above the prior CY/22 revenue midpoint. 

He came away from this call feeling incrementally more optimistic about the security spending environment relative to Fortinet, Inc FTNT and Palo Alto Networks, Inc PANW license assumptions. 

Barclays analyst Saket Kalia had an Equal Weight rating with a PT of $140, down from $145. CHKP grew billings below consensus, but he thinks it hurt by the Y/Y compared to three mega-deals in 2Q21. 

The comparables here will arguably get tougher in 2H with the Avanan acquisition lapping and significant 4Q long-term deferred. 

Mizuho analyst Gregg Moskowitz had a Neutral rating with a PT of $136. Product and subscription revenue each grew double-digits Y/Y in 2Q, the first time that this dynamic has occurred since 2011. 

Total billings growth Y/ Y did fall short of the Street's forecast, although management highlighted complex large deal compares and noted that net new business grew double-digits this quarter. 

The 3Q guidance was as expected. While a solid overall quarter, CHKP has struggled to execute consistently for years, he observed. Sustainability remains a big question as it pertains to the potential for CHKP to outperform going forward. He believes the potential is there, but he needs to see more evidence. 

Price Action: CHKP shares traded lower by 0.24% at $118.75 on the last check Tuesday.