Check Point Software CHKP Stock Analysis: It seems like every other week we receive news of a hack. Sometimes it’s a new hack such as Equifax. Or sometimes, it’s an existing hack where we’ve learned it was a larger impact such as Yahoo!
(Author’s Note: I’ve been personally affected by both of these hacks and am incredibly frustrated with the seemingly never-ending lackadaisical approach to corporate cyber security.)
Some of the most successful entrepreneurs see a problem and say “Hey – I can fix that.” And let me tell you, we have problems. State sponsored cyber espionage, your run of the mill hacker, phishing attempts, there are a ton of “bad guys” out there and firms like Check Point Software see an opportunity to solve (or mitigate) a problem in a rather large marketplace.
Check Point Software is an IT Security company who serves both corporations and consumers with a focus on transactions and communications security. The offer services and products for Cloud computing, data centers, enterprise security, small business and even home and consumer.
One immediately interesting thing to note about Check Point Software Stock is that they are the largest pure-play security vendor globally. And that’s quite a claim! In a market that my gut tells me is poised for astronomical growth, we have a company whose sole focus is cyber security and they are the largest company out there maintaining a laser focus on security. I’m liking what I’m seeing so far.
Good to Know: Check Point Software CHKP Stock does NOT pay dividends.
Check Point Software (Nasdaq: CHKP) went public June 1996 and opened at a share price of $4. Twenty one years later, Check Point Software is essentially at an all time high of $105.21/share. Interesting to note, Check Point Software CHKP Stock reached a similar high in September of 2000 ($105.58), only to crash over a period of two years bottoming out in November 2002 at $roughly $13/share. Since then, though, Check Point Software CHKP Stock has risen. It’s taken a nasty hit in the past month, but the good news is that by using IDDA for Check Point Software CHKP stock, we can see if we’ve discovered a new entry point for this cyber security company.
As usual, we’re going to start with the first IDDA point, the fundamentals.
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1- Fundamental Points: Check Point Software CHKP Stock Analysis
Who are they?
Check Point Software (Nasdaq) operates out of two main locations: Tel Aviv, Israel and San Carlos, CA, USA. Their mission statement reads:
“Check Point Software Technologies is the worldwide leader in securing the Internet. Making Internet communications and critical data secure, reliable and available everywhere has been and continues to be our ongoing vision. We are committed to staying focused on real customer needs and to developing new and innovative security solutions that redefine the security landscape.”
As mentioned above, Check Point Software CHKP Stock offers end-to-end IT security at a variety of levels and does so for more than 100,000 businesses and millions of users worldwide.
Gil Shwed (current CEO), Marius Nacht (Chairman of the Board), and Shlomo Kramer (who left in 2003) founded Check Point Software in 1993. While serving in the Israeli Defense Force, Shwed developed the initial idea for “stateful inspection” which led to the Firewall-1, the comapany’s first product. Shwed and his team were able to do this with an initial funding amount of $400,000.
Since founding, Check Point Software CHKP Stock formed partnerships with Sun Microsystems, was recognized as a market leader, went public, formed a partnership with Nokia, and started gobbling up other companies. You could almost say that Check Point Software was an incubator of sorts because several of its alum have gone on to start their own companies including Imperva, Palo Alto Networks, Tufin, and Indeni.
Good to Know: Check Point Software CHKP Stock have beat earnings estimates four quarters in a row and are due to report again in late January 2018.
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Check Point Software CHKP Stock has been steadily increasing revenue over the course of 5 years. In FY-12, the company $1.34 billion compared to $1.74 billion in FY-16 – roughly a 30% increase or around 6% growth YoY. However, their operating costs have also increased at a higher rate. FY-12 they reported $543mm in expenses compared to FY-16 which was $793mm, roughly a 46% increase. But their better news is that their EPS has increased in those 5 years from 3.19 – 4.72.
So a steady performing, well-known company in a market that possibly represents the “new normal” – who are they going up against?
Check Point Software CHKP Stock – The Competition
Per Morningstar, Check Point CHKP Stock is competing against these companies:
Now those are the top 5 by market cap, but I think it’s also important to know that they are also compared against Symantec, Square Inc., and Palo Alto networks – which was started by one of the original Check Point founders.
What are they doing right?
The first thing they did right was get started, and lay the foundation for IT security with Firewall-1. Secondly, the formed partnerships with companies like Sun and Nokia that allowed them to acquire and develop new technology and new solutions for new markets (such as mobile).
They are recognized over and over by various industry publications for their innovation and product quality. The company also has numerous success stories detailing their customer needs, solution approach, and the ultimate success.
What’s interesting is, what I feared about Yelp is a strength for Check Point Software CHKP stock. Meaning, Yelp didn’t have a very diverse revenue stream – simply it was ads. But Check Point is locked into a great industry and they are delivering great results to their shareholders and customers. Now – while I’m giddy about the company’s approach and the market they serve, I have to quote quality guru W. Edwards Deming when he said “In God we trust. All others must bring data!” Therefore, onto the technical points!
2- Technical Points: Check Point Software CHKP stock analysis
Technical analysis is the second point of the IDDA. As mentioned before, when Check Point Software CHKP Stock went public in 1996 it opened at around $4 a share and its price followed the tech boom (and subsequent bust) into 2001. However, a savvy investor could have turned $1000 into $25000 in a 5 year period. That same savvy investor could have then possibly turned that $25000 into almost $250000 by reinvesting in Check Point. The bumps and bruises along the way allow us to enter a stock, collect profit and then exit for another day.
So let’s take a look at some more modern data.
We can see that in the past 4 years, Check Point Software CHKP Stock has nearly doubled with fairly consistent growth. Now let’s take a look at what the Ichimoku and Fibonacci analysis show us.
Taking a look at Check Point Software CHKP stock’s daily chart, and performing the Ichimoku and Fibonacci analysis, we can see that the price broke above the Ichimoku cloud in November of 2016 and the 23% Fibonacci retracement level of $85.50 back in January 2017. In the middle of this year, the stock approached 100% and in late July fell through the Ichimoku cloud. But fought through it and is hitting a critical price point.
Let’s get a little more granular to really see what’s going on
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The short-term resistance levels are set at the next Fibonacci levels, at 109.49 and 111.12 respectively. Let’s take a look at the market sentiment.
3- Market Sentiment: Check Point Software CHKP Stock
My avid readers (of which there are countless I’m sure) may know that I like to bring my options trading experience to play to get a sense of how the market feels about stocks. Now – I am not encouraging you to trade options. One of my investing friends told me, “Options trading is like trying to pick up nickels in front of a steamroller.” But there are useful tools we can take from that side of trading to help inform us about a stock’s predicted direciton.
CHKP Stock – Other Indicators
So it’s worth noting that while Check Point Software CHKP stock beat earnings estimates, analysts weren’t enthused with Q4 projections, hence the roughly 8% drop in price in late October. Now nothing is definite, but it looks like the CCI is beginning to show an uptick where RSI is leveling off. The leading line (blue) on the MacD appears to be correcting to a bullish stock, but it’s not quite there. So here’s where the art meets science – my gut says that this is a well-run company that took a hit on an earnings report but will bounce back. I think we’re close to the bottom, but not quite there yet after today’s drop.
Check Point Software CHKP Stock Analysis – Investing Strategy
CHKP has great bones and is a steady stock. It won’t double your portfolio overnight, but it’s a company that’s in it for the long haul. The stock has shown that it can reach (and possibly exceed) $118 a share. The Fibonacci analysis shows a long-term level of 61% at 96.62 and is acting as a support. If it’s broken we could see further (probably temporary drops). However, the future cloud is bullish and moving upward.
But just because I am painting a rosy picture, doesn’t mean you get to forget your oblicgation which is to calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. I know I sound like a broken record, but you should consider joining the free master class to learn more!
To supplement your risk management strategy, I’d like to note that CHKP Stock’s Beta is 0.66 – meaning it’s about 34% less volatile than the market overall. That suggests a fairly steady stock that you can possibly add to your portfolia.
Luck for you, we provide Invest Diva’s calculations for important approximate levels, with regards to the Check Point Software CHKP stock analysis.
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There you have it! It’ll take a hefty investment to make a short-term profit, but if you perform your own analysis you might see that Check Poimnt Software CHKP stock could perform better as a long-term hold.
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