While it may seem like election coverage is the only thing hitting the airwaves these days, cybersecurity has stolen its fair share of headlines too. Verizon Communications Inc. (NYSE:VZ), which was all set to buy Yahoo! Inc. (NASDAQ:YHOO), just came out and said the massive breach may be enough to actually impact the deal. Meanwhile, The White House has publicly blamed Russia for a hack of the Democratic National Convention and said it would respond.
While there’s nothing good about bad cybersecurity, this news does bode well for Check Point Software Technologies Ltd. (NASDAQ:CHKP). From an investment standpoint, these recent headlines confirm that cybersecurity is a good sector to bet on, while Check Point — one of the largest pure-play vendors in the world — remains one of the best plays in the space.
For those not familiar, Check Point Software develops technologies to secure communications and transactions over the internet by businesses and consumers. The company has a range of offerings, but it’s best known for its firewall and virtual private network products.
Of course, firewalls can’t stop every threat, so CHKP has developed a comprehensive solution to attacks known as unified threat management (UTM).
In the recently reported second quarter, for example, CHKP stock introduced new optimized appliances that will provide organizations of any size “the power to run advanced threat prevention capabilities, such [as] full inspection of encrypted data, without compromising performance.”
That wasn’t the only victory in the company’s most recent earnings report, though; there were tangibles to applaud as well. While many companies are struggling to grow earnings — especially organically — Check Point posted solid, consistent growth. In Q2, earnings and revenue each grew by over 7%. Meanwhile, there’s a laundry list of fundamentals to like: CHPK stock boasts a profit margin of 41% and a 20% return on equity, to name a few.
Plus, as The Motley Fool recently pointed out, Check Point’s CEO has marketing spend under far better control than its competitor FireEye Inc (NASDAQ:FEYE). Plus, the company boasts a strong balance sheet, which is always one of the most important factors I consider before committing to an investment.
Downside of CHKP Stock
Despite these solid numbers, Check Point stock has been suffering lately. Shares of CHPK have slid over 13% in the last six months. That leaves CHPK stock at a good price, considering the megatrend it has at its back.
Indeed, while 7% of the CHPK float is held short, short sellers have been backing off since the need for cybersecurity software continues to be evident.
Indeed, the Yahoo hack and the DNC hack are hardly anomalies these days — they draw such media attention because they represent the ongoing threat everyone from individuals to corporations face in the digital world day in and day out.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
