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It’s Time To Check On Cyber-Security Stock Check Point Software

While there is fear that growth in cyber-security start-ups like Check Point Software (NASDAQ: CHKP) and Crowdstrike (NASDAQ: CRWD) is slowing, the industry is still growing at a high-double-digit rate, and opportunities are developing. Check Point, for one, offers a deep value that makes it stand out from Crowdstrike, among others. Trading at only 16X its earnings, its valuation is closer to blue-chip cybersecurity firm Norton-Lifelock (NASDAQ: NLOK) than high-flying Crowdstrike, which is trading above 150X its earnings. And then there’s ZScaler (NASDAQ:ZS), trading at over 250X its earnings, a valuation investors will find hard to rationalize over the coming few quarters. The takeaway for investors is that cybersecurity is a long-term investment opportunity, but not all cybersecurity stocks look like good buys right now.

There’s Value In Check Point Software Technologies

“Over the past quarter, cyber-attacks have increased by 32 percent while advanced attacks like ransomware have grown by 59 percent, underscoring why cyber-security is so critical to keep our world going. Our strategic vision of consolidated prevention-first security architecture is more relevant than ever to combat today’s cyber challenges,” says Gil Shwed, Check Point founder and CEO.

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Check Point Software Accelerates Growth

Check Point Software is among the slowest growing of the new-aged cybersecurity firms, but it has something the others don’t. While Crowdstrike and Zscaler are faced with rapidly deteriorating growth in the face of ever-toughening comps Check Point Software is actually accelerating its growth both sequentially and versus last year. The company reported $571.1 million for the 2nd quarter, which is up 8.6% versus last year and accelerated from 7% in the previous quarter and 4% last year. The gains were made in Product & Licensing and Security Subscription sales which grew by 12% and 14%, respectively. The only area of ​​weakness was in Updates and Maintenance which grew by a tepid 2.25% .

Moving on to the income, the news is a little mixed but ultimately supportive of the stock price. The company reported a 500 basis point contraction in the operating margin on both a GAAP and adjusted basis which is slightly worse than expected but not enough to offset the revenue strength. On the bottom line, the GAAP EPS fell by 1% YOY but the adjusted EPS grew 2% and beat the Marketbeat.com consensus by $0.03. The bottom line results were aided by share repurchases as well, with 2.6 million shares or about 1% of the float bought back during the quarter.

Check Point Software did not give any formal guidance for the coming quarters but did give a favorable update on deferred revenue. Deferred revenue is up 13% versus last year, which suggests to us revenue growth is still accelerating for this company.

The Technical Outlook: Check Point Software Falls To Support

Shares of Check Point Software fell more than 5.0% in the wake of the earnings report, but it looks like a bottom is in. The price action fell to the key support at $117.50 and bounced to form a Doji Candle. The Doji is a sign of indecision but one that also shows support at $117.50, support that should keep the stock moving sideways over the next few weeks to 3 months. Assuming this is so, the stock should begin to recover by the end of the year, providing there is no major deterioration in broader economic conditions. If the $117.50 level fails, however, the stock could fall back to the $110 level before finding a long-lasting bottom.

It's Time To Check Into Cyber-Security Stock Check Point Software

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