BMO upgrades Check Point on stronger growth and valuation upside

Investing.com -- BMO Capital Markets upgraded Check Point Software Technologies (NASDAQ: CHKP) Ltd to Outperform from Market Perform, citing increased confidence in the company’s growth trajectory and a reasonable valuation.

The firm raised its price target to $275 from $245, believing CHKP can transition from low to mid-single-digit growth to a high-single-digit security company over the next few years.

BMO sees potential upside in CHKP’s 2025 billings growth, estimating a 6.7% year-over-year increase compared to the consensus estimate of 5.7%.

This translates to FY25 net new billings of about $180 million, down slightly from ~$210 million in FY24.

The firm remains confident in the growth of Harmony (JO:HARJ) Email/Avanan, which helps ease the burden on core net new billings.

Check Point is also increasing its focus on the secure access service edge market, projected to reach $15 billion by 2025.

While CHKP’s secure access service edge offering may not need to directly compete with industry leaders like Zscaler (NASDAQ: ZS) and Palo Alto Networks (NASDAQ: PANW), it expects success from selling SASE solutions to its large installed customer base.

BMO highlighted positive changes in CHKP’s go-to-market strategy, with increased investment in sales, marketing, and partnerships.

Recent hiring data shows a notable increase in sales job openings at CHKP compared to competitors such as Palo Alto Network and Fortinet (NASDAQ: FTNT), which BMO views as a positive indicator for future growth.

Although CHKP has historically traded at a discount due to slower revenue growth, BMO noted that the revenue growth gap between CHKP and its peers has narrowed by 50% over the last five years, while the valuation gap has only narrowed by about 20%.

BMO believes CHKP’s focus on high-growth areas, positive go-to-market changes, and a favorable valuation position the company well for longer-term success.

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