NEW YORK ( TheStreet) -- Shares of enterprise security giant Check Point Software (CHKP - Get Report) are up almost 10% over the past couple of weeks, while also having made several new 52-week highs.
I don't believe it's coincidence that investors have flocked to Check Point's stock immediately after Cisco (CSCO) announced its $2.7 billion deal for anti-hacking company Sourcefire (FIRE), a deal that I consider to be very expensive at 12 times revenue, which assigned a 30% premium to Sourcefire.
The Street, meanwhile, wasted no time making predictions as to which would be the next company to be picked off. Looking to stay ahead of the game, analysts rushed to adjust their valuation models, immediately proclaiming how cheap other security companies were. Even Fortinet (FTNT), which has struggled to post any sort of returns all year, benefited from Cisco's willingness to overspend.
I get that tech companies often trade in tandem. So if Cisco values Sourcefire at a 30% premium, logic would say that Sourcefire's peers should command something close. But it's not always an "apples to apples" comparison.In the case of Check Point, a little more understanding is required. First, there's no denying the company still has a sizable market lead in enterprise network security. But unlike Sourcefire, which continues to grow at a 20% clip, Check Point's recent performance has shown no "fire" at all, including growth of only 4% this recent quarter. can only be effective for so long. Contrary to popular opinion, I don't believe that Check Point has done enough to secure or add to its current market share.