Evercore ISI Unsure Checkpoint Software (CHKP) Can Deliver on Upbeat Tone for 2024
Evercore ISI analyst Amit Daryanani reiterated an In Line rating and $135.00 price target on Checkpoint Software (NASDAQ: CHKP).
The analyst comments "CHKP reported a solid Q3 beat this morning before market open with revenue/EPS of $596.3M/$2.07 vs. consensus $592M/$2.02. Revenue upside was attributed to strength in subscriptions (+15%) which was driven by Harmony/e-mail, though calculated billings of $531M were down -5% y/y and moderately below consensus ($559M) due to a combination of a high rate environment/ flexible consumption models offered via Infinity weighing on durations and deal timing. Product revenue declined -14% y/y due to continued delays in product refresh, but management indicated that they saw strong renewals and an improved pipeline in Q4 which includes some of the deferred deals during the first three quarters. Key highlights from the report/call: 1) CHKP called out positive indicators headed into Q4 with growth in annualized bookings during Q3 in addition to mid single-digit RPO growth (management sounded constructive on an improving macro backdrop as well and indicated that Q2 was the trough for the firewall market). 2) Shorter durations and the impact on billings/FCF will likely persist (rates + expanding Infinity mix), though CHKP will anniversary on this headwind in CY24. 3) M&A: CHKP closed on three acquisitions in the past 60 days including i. Perimeter 81 (when combined with company’s recently introduced SD-WAN, provides CHKP with a comprehensive SASE offering called Quantum SASE which was GA on Oct 8), ii. Atmosec (SaaS security), and iii. rmsource. Perimeter 81 has ~$25M in ARR. 4) Management sees limited impact from employees called for reserve military duty amid the recent geopolitical conflict (~5% of employees have been called, though the company has continued to launch products such as Quantum SASE & Horizon Playblocks and complete acquisitions). Net/net: CHKP has been making the R&D/innovation, go-to-market, and M&A investments to position the company for growth acceleration, though investors will focus on CHKP’s ability to execute in CY24 (management struck a positive tone, easing y/y compares should help as well). Maintain In Line and $135 Target."
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Shares of Checkpoint Software closed at $131.84 yesterday.