CHKP: Limited China Exposure And Cyber Partnerships Will Support AI Security Expansion

Analysts have trimmed their average price target on Check Point Software Technologies by about $9, reflecting a modest reset in fair value assumptions as they weigh lower target prices across several firms against updated views on growth, margins, and future P/E multiples.

Analyst Commentary

Recent Street research on Check Point Software Technologies clusters around lower price targets, but the underlying commentary splits into two camps, with some analysts highlighting support for the long term story and others leaning more toward near term caution on growth and execution.

Bullish Takeaways

Bullish analysts point to Check Point's relatively minimal China exposure, which they see as reducing potential geopolitical or regulatory shocks that could affect revenue visibility or margins.
The recent upgrade from one firm signals that some on the Street still see room for upside if management can execute on product positioning and maintain discipline around profitability.
Supportive voices tend to frame the lower price targets as a recalibration of fair value assumptions rather than a rejection of the underlying business model.
There is a view among more optimistic analysts that a reset in expectations could set a cleaner baseline for future evaluation of execution on growth initiatives.

Bearish Takeaways

Several bearish analysts have cut price targets by double digit dollar amounts, which reflects a more conservative stance on how much investors should be willing to pay for the current growth profile and P/E multiple.
Citi's decision to place Check Point on a "downside 90 day catalyst watch" highlights concern that upcoming catalysts could skew toward weaker outcomes for sales trends or bookings.
Citi also flagged caution on firewall refresh activity, which feeds into broader worries about the company's ability to accelerate sales growth and sustain previous revenue expectations.
The cluster of lower targets from multiple firms, including JPMorgan, underlines a theme that execution will need to be consistently solid to justify higher valuation multiples from here.

What's in the News

The U.S. administration is weighing a greater role for private companies in cyberwarfare, highlighting ongoing government focus on cyber defense and the role vendors like Check Point can play in that ecosystem (NYT periodical).
Reports that China has banned several foreign cybersecurity vendors, including Palo Alto Networks and Fortinet, continue to draw attention to country exposure and vendor mix within security portfolios. Analysts have flagged Check Point's limited China exposure as a relative differentiator in this context (Reuters periodical).
Check Point announced a new partnership with NASCAR team Hendrick Motorsports and its No. 17 Chevrolet to secure the team's growing digital footprint, with branding across the car, fire suits, and track equipment, while providing threat prevention and unified security management across the motorsports environment (Client announcement).
The company introduced Check Point Exposure Management, a platform built to consolidate exposure data, prioritize vulnerabilities using real world exploitability and business context, and automate remediation across more than 75 integrated security controls, with alignment to Gartner's CTEM framework (Product announcement).
Apono revealed a new integration with Check Point to support a SASE based Zero Standing Privilege architecture that focuses on temporary, event driven access, real time identity provisioning, and least privilege enforcement for distributed cloud environments (Client announcement).

Valuation Changes

Fair Value: trimmed from $226.51 to $217.63, a modest step down in the modeled equity value per share.
Discount Rate: adjusted slightly lower from 10.61% to 10.46%, implying a small change in the required return used in the model.
Revenue Growth: kept effectively unchanged, moving from 6.10% to 6.10%, signaling only a very minor tweak to top line assumptions.
Net Profit Margin: nudged higher from 30.93% to 31.26%, reflecting a slightly stronger profitability assumption.
Future P/E: reduced from 32.14x to 30.44x, indicating a lower multiple being applied to projected earnings.

Quantum Force appliances and the Infinity platform drive strong revenue growth, with potential for sustained growth through customer retention and cross-selling.
Strategic AI integration and expansion initiatives are set to enhance user experiences and drive innovation-led revenue growth.
Competitive pressures and reliance on Taiwan could strain margins, while strategic shifts may disrupt execution amidst macroeconomic uncertainty and tariff implications.

Catalysts

About Check Point Software Technologies

Develops, markets, and supports a range of products and services for IT security worldwide.What are the underlying business or industry changes driving this perspective?

Check Point's Quantum Force appliances have driven strong demand, resulting in significant product and license revenue growth. This trend, expected to continue with a robust pipeline, indicates potential for sustained revenue and earnings growth.
The Infinity platform continues to gain traction, with strong double-digit revenue growth and increased customer adoption, now accounting for over 15% of total revenue. This supports expectations for revenue growth through enhanced customer retention and cross-selling opportunities.
Strategic focus on SASE and AI integration, such as embedding Check Point security engines that use AI for enhanced user experience and security, suggests future revenue growth as enterprises seek comprehensive solutions for modern hybrid workforces.
Expansion initiatives, like the new R&D center in India, aim to improve user and cyber practitioner experiences, potentially impacting revenue and net margins through innovation-driven revenue streams and cost management.
The continued investment in partnerships and key talent, such as the integration of Gil Friedrich's division and appointing Yonatan Zanger as CTO, positions Check Point to capitalize on AI and hybrid workforce security trends, potentially driving revenue and EPS growth.

Check Point Software Technologies Earnings and Revenue Growth

Check Point Software Technologies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Check Point Software Technologies's revenue will grow by 5.9% annually over the next 3 years.
Analysts assume that profit margins will shrink from 32.5% today to 31.5% in 3 years time.
Analysts expect earnings to reach $989.0 million (and earnings per share of $10.1) by about September 2028, up from $858.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $865.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.6x on those 2028 earnings, up from 24.6x today. This future PE is lower than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to decline by 3.08% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.63%, as per the Simply Wall St company report.

Check Point Software Technologies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The macroeconomic environment presents challenges such as potential volatility and uncertainty, which could lead to deals being delayed or slipping into subsequent quarters, impacting near-term revenue projections.
The company faces a competitive landscape in emerging technologies like SASE and AI, potentially leading to increased spending on research and development and marketing, which could strain net margins.
The company is dealing with the implications of international tariffs and manufacturing risks, particularly with their reliance on Taiwan for production, which could affect cost of goods sold and gross margins.
The focus on refresh cycles in the firewall market, while currently driving growth, may not sustain long-term revenue increases if the overall market does not grow substantially as customers eventually sweat assets.
The transition regarding their CNAPP strategy and reliance on partnerships, such as with Wiz, suggests a shift in priority that could temporarily disrupt execution and revenue from this segment.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $223.054 for Check Point Software Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $285.0, and the most bearish reporting a price target of just $173.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.1 billion, earnings will come to $989.0 million, and it would be trading on a PE ratio of 29.6x, assuming you use a discount rate of 10.6%.
Given the current share price of $196.56, the analyst price target of $223.05 is 11.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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