Several investment banks have updated their reports on
(Nasdaq:CHKP) after the company published its first quarter results.
Analysts generally expect the company's revenue growth to ease somewhat, but predict rising profit per share. Piper Jaffray alone raised the company's price target, from $70 to $75. SSB beat that, however, with a target of $85.
Merrill Lynch reiterated its Long Term Buy rating and left Check Point's price target unchanged at $70, 13% above the share's closing rate yesterday. The analysts say that the company's results were stable despite the deterioration in its business environment. But they note that expectations of the company had evidently been excessive.
Check Point management, headed by Gil Shwed, believes the company can sustain 50% revenue growth. Merrill Lynch begs to differ and lowered its revenue forecasts for the coming two years. They now expect 2001 revenues of $621 million, compared with an earlier forecast of $639 million, and 2002 revenues of $825 million.
Merrill Lynch predicts earnings of $1.28 per share in 2001, climbing to $1.6 per share in 2002.
SSB reiterates price target of $85
Salomon Smith Barney is more optimistic. The bank retained its Buy recommendation but cut its target price from $100 to $85, still way above Merrill Lynch's estimate of $70. Analyst Chuck Jones says the company pampered investors in the last couple of years by reliably beating forecasts. Its results were fine in the first quarter too, but it did not spring happy surprises.
Check Point had reported Q1 revenue of $145 million, a cool $5 million below SSB's forecast. Jones says that U.S. sales had been slower than expected. Also, Check Point's agreement with Nokia had been amended in a way that reduced the Israeli company's revenues for the quarter by $2 million. Still, Check Point beat Jones' EPS forecast by 3 cents.
Jones does believe Check Point can maintain revenue growth of 50% this year, based on sustained strong demand for virtual private networks. But like Merrill Lynch, Jones prefers to lower his revenue forecasts for the year, primarily because income from the Nokia deal will be $10 million less than initially expected.
Jones accordingly lowered his revenue forecast for 2001 from $675 million to $646 million. For 2002, he lowered his revenue forecast from $980 million to $875 million.
He did not change his prediction that the company will post EPS of $1.32 for 2001. But he reduced his EPS forecast for 2002 to $1.75.
Goldman Sachs leaves Check Point in pick list
For its part, Goldman Sachs is betting on 2001 revenues of $642 million, down from an earlier prediction of $650 million. But given the company's wide profit margins, Goldman Sachs foresees earnings of $1.35 for 2001, 5 cents above a previous forecast.
Goldman Sachs left its 2002 expectations unchanged at $925 million revenues and $1.86 EPS.
Goldman Sachs' analysts also believe Check Point can achieve 50% growth in 2001, and left the share in its list of stock picks.
Piper Jaffray on the other hand did not hasten to lower expectations. The bank reiterated its Strong Buy for Check Point and lifted the price target from $70 to $75. Piper Jaffray also predicts Check Point can achieve 50% growth this year despite slowing sales in the U.S.
After all, data security is a must these days, the analysts point out. Data security software is are also relatively cheap, hence cost-cutting companies are not likely to ax them first.
The analysts also note that Check Point has achieved a name for itself as first in the market with advanced solutions.