By Sam Boughedda
Check Point Software Technologies (NASDAQ:CHKP) was downgraded to Market Perform from Outperform at Raymond James on Friday, with analysts removing the firm's price target on the stock.
They told investors in a note that their previous bullish stance was based on checks that suggested the company was about to enter into an unusual period of inflation that would enable growth acceleration that was not reflected in estimates.
However, they are "now forced to reevaluate this as broader spending intentions have decelerated and could ultimately lead to a period of deflation."
CHKP shares dropped Friday, hitting a low of $130.60 per share. At the time of writing, the stock is down 1.5% at $132.35, adding to its over 7% loss in the last 12 months.
The analysts explained that the firm's checks suggest market-rate/plus growth is fleeting for CHKP, with recent conversations with channel partners indicating a deteriorating spending environment for Check Point solutions.
"Check Point-specific demand is largely renewals at smaller amounts or shorter durations (suggests potential for share loss to increase), new product reception in key areas (Lightspeed, SD-WAN) has been lackluster, and this is occurring alongside an investment cycle at the company," the analysts wrote.
"Balance sheet optionality remains intriguing, and we understand investors who prefer to use CHKP as a relatively inexpensive way to get exposure to cybersecurity with minimal risk of valuation multiple contraction but see little upside to estimates or valuation given current trends and are choosing to step aside for now," they concluded.