Check Point Software Gains Ground: Morgan Stanley Highlights Stable Demand And Promising Portfolio Expansion

Morgan Stanley analyst Hamza Fodderwala upgraded the shares of Check Point Software Technologies Ltd CHKP from Underweight to Equal-Weight and raised the price target from $118 to $144.

The analyst has upgraded the stock because of more stable demand and market share trends based on the latest checks and reseller survey.

 An expanding product portfolio beyond core network security should drive higher recurring revenue mix, said the analyst.

The portfolio expansion, according to the analyst, should sustain 3-4% topline growth overall in CY24/25.

The analyst noted that the checks have been constructive on newer products like Email Security, given the significant rise in phishing attacks this year, fueled in part by adoption of GenAI technology.

The analyst opined that slower hiring, stronger dollar and higher interest income could drive bottom line upside and 8% EPS CAGR from CY23-25.

Given significant underperformance year-to-date, valuation at discount to peers and limited downside to forward estimates now, the analyst thinks CHKP is unlikely to underperform over the next 12 months.

The new $144 price target is based on 15X CY25 EPS. The analyst thinks CHKP could trade closer to peers, given its higher recurring revenue mix and limited downside to forward estimates.

Price Action: CHKP shares are trading higher by 1.05% at $135.73 on the last check Monday.