Check Point upgraded at William Blair on new opportunities and valuation

William Blair has upgraded its rating on Check Point Software Technologies (NASDAQ:) to ‘Outperform’ from ‘Market Perform’ on a valuation gap relative to peers and their belief that the stock can reach an inflection point in 2024.

Check Point stands to benefit from prior Infinity deals signed, new opportunities based on its consolidated platform story, and the launch of new firewall products, noted William Blair.

“In our view, investors looking for a highly profitable business that has been written off by many investors may want to reconsider the story,” wrote analysts in a note to clients Wednesday.

“In particular, we believe the risk/reward has become more attractive given the recent run-up in the cybersecurity space and the downside protection offered by the company’s high degree of profitability and large cash balance.”

Analysts pointed out that expectations appear low with the company still working on striking a balance between stabilizing its product business and delivering growth in subscription services/ Infinity.

The valuation gap relative to competitors is another reason for the upgrade. Check Point trades at about 6 times revenue and about 18 times free cash flow, while Palo Alto Networks and Fortinet trade at less than 12.5 and less than 9 times revenue, respectively.

“We continue to believe Check Point has a real opportunity to enhance its market position through successfully delivering its go-to-market functions and messaging,” they added.

CHKP stock is trading flat in the premarket session Wednesday at $160.31.