While this tech company has recently agreed to be acquired, plenty of shareholders have filed lawsuits to up the price. Meanwhile, this contributor thinks the company might be better-positioned as a potential buyer of other businesses.
Buy: Check Point Software Technologies (CHKP)
From Top Stock Insights
Check Point Software Technologies’ (CHKP) recent earnings release sent shares lower by more than 3%. Though Check Point reported EPS of $1.06, $0.03 a share better than expected, its revenue came in roughly in-line with analyst expectations.
The stock fell because of its second-quarter guidance. Check Point forecasted EPS of $1.02 to $1.09, compared to previous analyst forecasts that it would earn $1.09 per share. It’s a similar story for the company’s revenue guidance, which was adjusted to a range of $405 million to $435 million compared to analyst forecasts of $428 million.
The Check Point CEO used some cautious language on the conference call, referring to slowing spending in the IT environment. This is, of course, despite a healthy market for cybersecurity solutions in the wake of the Panama Papers, perhaps the largest cyber-attack in history.
Several industry analysts including Citi’s cybersecurity stock analyst and RBC Capital’s cybersecurity stock analyst are calling for a period of consolidation among cybersecurity stocks. If this takes place, Check Point would likely be a buyer, rather than an acquisition target. Certainly Check Point’s $3.7 billion in cash would come in handy if it decides to pursue other companies. Its $14.75 billion market cap means that there aren’t a lot of potential buyers who would be able to acquire Check Point.
The fact that none of the major cybersecurity stocks has moved higher since the release of the Panama Papers, perhaps the single greatest catalyst for the cyber security market that we’ll see all year, tells me that the market either doesn’t think it will have an effect on these companies or isn’t paying attention.
I would argue that the Panama Papers will drive new customers into the cybersecurity market and cause existing customers increasing their spending _ as they see images of Panamanian law firm Mossack Fonseca’s offices around the world raided by law enforcement agents.
Ian Wyatt, Top Stock Insights, www.topstockinsights.com, 866-447-8625, April 22, 2016