On Thursday, Goldman Sachs (NYSE:GS) analyst downgraded Checkpoint Software (ETR:SOWGn) stock from "Buy" to "Neutral," while slightly increasing the price target to $207.00 from $204.00. The company, currently valued at $20.53 billion, trades at a P/E ratio of 25.02, which according to InvestingPro analysis, suggests the stock is trading above its Fair Value.
Goldman Sachs' assessment of Checkpoint Software's future earnings growth led to the change in rating. The analyst noted that while the company's revenue and earnings per share (EPS) growth had been a central part of the previous "Buy" thesis, the outlook for 2025 suggests that EPS growth may be subdued, potentially impacting the stock's performance.
Checkpoint Software's stock has seen a significant increase since it was added to Goldman Sachs' Buy List on February 14, 2023, outperforming the S&P 500 with a 49% gain compared to the broader index's 43% rise. This performance followed a period of lagging behind the S&P 500. The analyst attributed this recent success to the company's potential for an improved competitive position, as indicated by industry data showing slowed pace of market share loss, increased product innovation, and enhanced market strategies.
The analyst pointed out that Checkpoint Software's stock is closely tied to its EPS growth. The firm's analysis suggests that the stock's correlation with EPS growth is a significant factor to consider for future valuation. According to InvestingPro data, the company maintains a strong financial health score of GOOD, with management actively buying back shares and maintaining more cash than debt on its balance sheet.
Despite the recent improvements in Checkpoint Software's go-to-market approach, such as increased hiring, improved channel tiering, and better incentives, the forecast for muted EPS growth in 2025 has prompted a more cautious stance from Goldman Sachs.
The rating downgrade comes even as Checkpoint Software has made strides in its refresh cycle and improvements in its go-to-market strategy during 2022-2023. These efforts were expected to yield over 10% revenue growth and over 20% EPS growth, which had been key to the previous optimistic rating.
In summary, the revised outlook by Goldman Sachs reflects a tempered expectation for Checkpoint Software's earnings growth in the coming years, despite the company's recent positive performance and strategic enhancements. The new price target of $207.00, up from $204.00, suggests a modest upside potential from the current levels, while analyst targets across Wall Street range from $110 to $230, reflecting diverse views on the company's prospects.
In other recent news, Check Point Software Technologies (NASDAQ:CHKP) Ltd. reported a 7% year-over-year revenue increase to $635 million in the third quarter of 2024. The company also saw a non-GAAP EPS rise of 9% to $2.25 and a subscription revenue growth of 12%. Check Point's recent acquisition of Cyberint for $186 million is anticipated to enhance security operations capabilities. Deutsche Bank (ETR:DBKGn) maintained a Hold rating on Checkpoint Software and increased the firm's price target to $200. The bank's analyst pointed to the recent appointment of Nadav Zafrir as CEO as a potential catalyst for the cybersecurity firm's stock.
The firm also noted the company's involvement in key growth sectors such as Secure Access Service Edge (SASE), email security, and threat intelligence. Furthermore, Check Point Software Technologies Ltd. unveiled its AI-based Quantum (NASDAQ:QMCO) Firewall R82. Meanwhile, SolarEdge Technologies (NASDAQ:SEDG) elected Avery More as the new Chairman of the Board of Directors, succeeding Nadav Zafrir, who will continue to serve as a board member. Guy Gecht, former CEO of Electronics for Imaging and interim CEO at Logitech (NASDAQ:LOGI), also joined the board.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.