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On Wednesday, TD Cowen maintained a positive stance on Checkpoint Software (NASDAQ:CHKP), with analyst Shaul Eyal increasing the price target to $285 from the previous $250, while keeping a Buy rating on the company's stock. Eyal's assessment highlights Checkpoint's defensive attributes, such as its low growth, predictability, and strong annual free cash flow (FCF) of $1 billion, which he believes provide a safety net for tech investors, especially in a turbulent market. According to InvestingPro data, the company maintains a robust balance sheet with more cash than debt, while trading at a P/E ratio of 27.5x.
Checkpoint's stock has reportedly remained resilient during recent market fluctuations, though InvestingPro data shows an 8.7% decline over the past week. The firm's solid performance, highlighted by an impressive 88.5% gross profit margin and strong financial health score, and what Eyal refers to as "unheroic guidance expectations" contribute to the anticipation that Checkpoint will continue its long-term re-rating journey. Eyal expressed confidence that the company would at least meet the established estimates, prompting the price target increase.
Eyal noted that Checkpoint is in the process of implementing changes and is increasingly focused on customer success. As management aims to gradually boost growth towards 10% and beyond in the medium term, he foresees a potential re-rating of the shares. The new price target of $285 is based on a 26 times multiple of the firm's estimated earnings per share for 2026, or 24 times excluding cash.
Checkpoint Software is scheduled to report its earnings before the market opens on April 23, 2023. The forthcoming earnings report is likely to provide further insight into the company's financial health and performance, as well as the progress of its go-to-market (GTM) strategy that has been revitalized under current management.
In other recent news, Checkpoint Software Technologies Ltd. has seen several significant developments. BMO Capital Markets upgraded Checkpoint's stock from Market Perform to Outperform, raising the price target to $275, reflecting confidence in the company's growth potential. Similarly, BofA Securities upgraded Checkpoint from Neutral to Buy, increasing the price target to $260, citing the positive impact of new leadership on the company's performance. Piper Sandler also raised its rating to Overweight with a price target of $260, highlighting optimism about Checkpoint's future prospects under CEO Nadav Zafrir.
Additionally, Checkpoint Software has formed a partnership with Variscite to enhance IoT security, integrating Checkpoint's Quantum IoT Protect with Variscite's System on Modules. This collaboration aims to protect devices against sophisticated cyber threats and comply with the EU's Cyber Resilience Act. Stephens, another research firm, initiated coverage on Checkpoint with an Equal Weight rating and a $255 price target, noting the company's leadership transition and potential for revenue growth. These recent developments reflect a growing investor interest and confidence in Checkpoint Software's strategic direction and market opportunities.
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