Tue: Did Check Point miss any targets?
In a world in which companies that are selling nothing but a dream are valued in the billions, analysts are disappointed because Check Point missed a forecast by $900,000 (which isn’t even true).
Shlomo Greenberg
I believe the investor public is much smarter than many people think. All it has been doing in recent weeks is to sit on the fence. Investors believe that they are faced with a scenario of rising inflation and a slowing economy, which is a definite reason to leave the market. In my opinion, this is the reason for the situation in stocks and bonds. The market will continue its stuttering until the picture becomes clear.
Look at Check Point (Nasdaq: CHKP). The buzz about the company’s first quarter results came to an end only this morning. On April 14, less than a week ago, the important Meta group chose Check Point as the leading software protection services company, out of all the vendors fighting over the various market segments in the sector. Meta Group, a subsidiary of the prestigious Gartner group, is a company that provides evaluations of companies dealing in protection of transmitted information. Main Street pays attention to what such companies are saying, while Wall Street pays attention to analysts, which is a pity.
This selection of Check Point as the leader among twelve large vendors, including Cisco Systems (Nasdaq: CSCO), McAfee Security for Consumers, Symantec (Nasdaq: SYMC), and Juniper Networks (Nasdaq: JNPR), is a bit more important than analysts unceasing jabber. I’ve explained where analysts’ problems lie. Virtually all of them know exactly what state the market is in, and Check Point’s position in it. But the competition for publicity, and the “maybe” (maybe Check Point will miss, after all), distracts analysts; instead of concentrating on the figures, they concentrate on possibilities.
Just before Check Point published its results, Merrill Lynch analyst Edward Maguire wrote that he thought that Check Point would either meet or beat expectations. In his opinion, despite lower valuations in software security, Check Point is still attractive. He predicted that the company would report a profit of $0.29 per share, 16% more than its $0.25 per share in the corresponding quarter in 2004, and sales of $138.9 million, up 19.6%.
Check Point published its results yesterday morning: sales of $137.7 million, and EPS of $0.29, or $0.30, excluding one-time provisions. The company bought back 2.1 million shares for $50 million in the quarter.
Now let’s look at the responses by investors and analysts. Analysts questioned Check Point vice-chairman Jerry Ungerman about why the company’s sales were $900,000 low. “I don’t know why they decided [that we missed]. Our guidance for sales was $136-140 million in the quarter,” Ungerman said. So what if their sales were $137.7 million. Let’s be honest with ourselves. In a world in which companies selling nothing but dreams are valued in the billions, and in which accuracy is the last thing anyone cares about, analysts are disappointed because Check Point missed a forecast by $900,000, which isn’t even true. I’m very sorry, but I stick to my assessment that Check Point is one of the few technology shares on Wall Street that offers a real economic investment. Why do I think that? Because of the facts, ladies and gentlemen, because of the facts.
Published by Globes [online] - www.globes.co.il - on April 19, 2005
Midas
