Check Point Software Technologies Inc (CHKP)

[midastouch017]

Check Point gains on upgrade
By Susan Lerner, MarketWatch
Last Update: 2:26 PM ET April 12, 2005

NEW YORK (MarketWatch) - Check Point Software Technologies Ltd. rose Tuesday after Jefferies & Co. upgraded the security software provider.
A series of channel checks indicated that the company's first-quarter results could come in above the broker's target.

Shares of the Ramat Gan, Israel, company (CHKP: news, chart, profile) were up 60 cents, or 2.7%, to $22.63 in afternoon trade.

"We believe 2005 could be a breakout year for Check Point, based on continued sales of its core products to existing customers and upside from sales of emerging products," analyst Katherine Egbert told clients as she raised her rating on the shares to buy from hold.

Her price target rose to $26 from $23.

After a "spotty" performance in 2003, Egbert said, the company gained momentum in second-half 2004 with an array of new products and took advantage of the buyout of Netscreen - its closest competitor.

"We believe both the near- and longer-term fundamentals at Check Point are improving as the company's gradual evolution from a point FW/VPN (firewall/virtual private network) vendor into a broader end-to-end security provider is gaining momentum and market acceptance," Egbert said.

Meanwhile, she added, the company appears to be rising to the challenge competitively.

"We still hear some reports of Juniper [Networks] and Cisco [Systems] winning new deals in the mid-market, but it is much more difficult to dislodge Check Point from existing accounts in the enterprise and carrier space," Ebgert said.

Given the "upbeat" channel checks, she believes Check Point is poised to meet or beat her first-quarter estimate for earnings of 28 cents a share and revenue of $138 million

Against that backdrop Egbert raised her 2005 forecast to earnings of $1.21 on revenue of $590.8 million from earnings of $1.18 on revenue of $587.5 million. Her 2006 outlook is earnings of $1.32 a share on revenue of $665.2 million against her previous estimate of earnings of $1.24 on revenue of $662.6 million.

Check Point is scheduled to report first-quarter numbers April 18. The average forecast of analysts polled by Thomson First Call is earnings of 29 cents a share on revenue of $138.8 million.

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