With recent weakness in its stock Checkpoint Software Technologies Ltd. (NASDAQ: CHKP), the leader in internet security, has become a very attractive play in the security space. A space incidentally, that IBM has indicated it plans on making an acquisition. After about a year of slow growth the company has managed to integrate past acquisitions and is starting to fire on all cylinders. It saw revenue soar 29% to $184 million in Q3. Earnings jumped 21% to 41 cents a share. Analysts were looking for 38 cents.
With operating margins of 52.3% in Q3, Check Point has better margins than many of its competitors, like Symantec Corporation (NASDAQ: SYMC). By conducting its R&D in Israel it limits its costs as Israeli engineers, while world class in skill, don't get paid like they are world class.
With the recent market sell-off, the stock is now trading under $22 a share which gives it a PE of under 18. This makes for a very intriguing play for the coming year. Checkpoint continues to launch new products designed to ensure organizations receive the highest levels of integrated application security without impeding network traffic and degrading an end user's internet experience. The traction these new products get will ultimately determine if Checkpoint will continue its revival.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer holds stock in CHKP. He holds no position in any other stock mentioned as of 11/15/07.











Reader Comments (Page 1 of 1)
12-04-2007 @ 5:27PM
Stromseal said...
Set to soar? Their $600 million dollar end-point acquisition has yielded negligible bottom line results. In fact, their last quarter sales were only marginally improved over 2nd qtr. And word from the channels hasn't been good either. Considering their long-standing "box pushing" philosophy in what has now become a commodity market, end-point solution selling requires a different flavor of reseller: one who deals with desktop solutions and NOT the network edge. The edge is where checkpoint has lived and breathed since its birth. Now, it would appear, they are refusing to grow up and accept the challenges before them, instead acting like petulant children throwing a tantrum and crying that they're being misunderstood.
12-08-2007 @ 2:04PM
MassTransit said...
Any company of this size whose CEO insists on approving every sales deal, large or small, and reviewing an entry-level hire resume' is too consumed with micromanagement to steward it towards growth. It's acquisitions have expanded its product but in markets that are becoming increasingly competitive moving towards commoditization. Executive management must have broad awareness and perspective to lead in these busy times. Delving into every minutia or riding a Segway stand-up scooter around the executive conference table during business meetings is NOT conducive to achieving increased stock value. Of course, notwithstanding sycophantic recommendations of a stock shill, I suppose if you short the stock you could still realize a decent return.