Check Point Leaves Investors Feeling Insecure
Breach In Growth Momentum
For its third quarter, Check Point earned $152.4 million, or 73 cents per share on revenue of $332.4 million. While the revenue total arrived slightly below estimates of $333 million, it did show 8% year over year from $308.3 million. Likewise, net income of $152.4 million was 14% higher from the same period of a year ago. The company attributed the improved results to growing demand for its Internet security software. Check Point's chairman and CEO, Gil Shwed offered this:
Third quarter results continued to be good with healthy growth in enterprise appliance units and software blade sales. Our revenues and earnings per share came in at the upper half of our projections. Geographically, North America continued to deliver great results with double digit growth in product and service revenues.
The numbers were impressive. However, this was not enough to prevent a selloff in the stock immediately after the company issued guidance for the fourth quarter. Investors were displeased with the revenue range of $355 million to $387 million. On average, analysts projected $382 million. Similarly, the low end of Check Point's adjusted earnings projections of 84 cents was significantly below analysts' expectations of 90 cents per share. As a result, the stock plummeted almost 13%.
Concerns regarding Europe have a lot to do with the company's conservative guidance. This seems to be consistent with rival Fortinet, which cut full-year projections just the day prior due to weak demand in China and Europe - sending shares down almost 20%.
Overall, Check Point reported a solid quarter. In light of the ongoing fiscal concerns with Europe, I think the company has taken the right approach with its guidance. However, the bigger issue with Check Point will come from the competition -- in particular, from the likes of enterprise security darling Palo Alto Networks (PANW) . In its first quarter as a public company, Palo Alto did what it had to do to affirm investor confidence in its business.
For its fiscal fourth quarter, the company saw revenue jump to $75.6 million -- representing an increase of 88% and topping the $40.2 million it reported in the same quarter of a year ago. Also impressive was its reported loss, which narrowed to $4.6 million on a GAAP basis or 18 cents per share. This compares favorably to its net loss of $6 million in the same period of a year ago.