Piper Jaffray sees upside for Check Point
"Checks with domestic resellers indicate sales were up 5% sequentially in the March quarter."
Globes correspondent 12 Apr 05 15:34
Investment house Piper Jaffray has issued an upbeat preview of network security company Check Point's (Nasdaq: CHKP) first quarter results. Check Point is due to report on April 18 before the market opens.
"Based on conversations with 9 resellers (7 domestic and 2 U.K.), we believe there is upside to the March quarter Check Point product numbers (53% revenue)," analysts Gene Munster and Joshua Labs write.
"We expect product sales to be flat sequentially, while the Street is modeling for sales to be down 4%. We note investor concern regarding European sales; however, our limited checks in this geography suggest European sales are stable.
"Checks with domestic resellers indicate sales were up 5% sequentially in the March quarter. Importantly, all vendors (including those in the U.K.) suggested flat to positive trends in sequential product sales. The positive sales trends were primarily attributed to perimeter upgrades as opposed to new product sales.
"While we've only completed checks with two European resellers (both in the U.K.), these checks suggest sales to be flat or slightly up from the December quarter. Sales in the Europe, Middle East, and Africa (EMEA) region accounted for 40% of sales in 2004 (sales in the Americas accounted for 43%).As a reminder, the company reported strong sales into the EMEA region during the March quarter of 2004. Channel comments suggest this may be a result of seasonal spending trends in government sales.
"In line with previous quarters, success in sales of new products remains mixed. While feedback was positive regarding the Integrity line, results continue to be mixed in regards to InterSpect. We now believe success in the InterSpect product line will hinge on Check Point's ability to sell end-to-end security solutions marketed under its Total Access Protection architecture and its ability to leverage near-term success with Integrity.
For the March quarter we are going to $0.30 on $142.1 million from $0.29 on $139.0 million. The Street is currently looking for $0.29 on $138.8 million.
"We maintain our Outperform rating on CHKP.
"CHKP shares are highly volatile and will likely be sensitive to volatility in the IT spending environment. Currently, visibility in the IT spending environment remains difficult as the overall economy continues to experience fluctuations."
In contrast to Piper Jaffray, C.E. Unterberg, Towbin has cut its revenue estimates for Check Point on the basis of its own checks with resellers. Unterberg has revised its first quarter estimates to $0.29 EPS on revenue of $138.7 million, while for 2005 as a whole, Unterberg sees EPS of $1.21 on revenue of $588.9 million. Both investment houses have a $26 target price for Check Point, whose shares closed at $22.03 yesterday.
Published by Globes [online], Israel business news - www.globes.co.il - on April 12, 2005
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