Check Point Software Technologies is the IBD Stock of the Day ahead of the cybersecurity firm's first-quarter earnings report on April 27. CHKP stock has gained 23% in 2022 as the cybersecurity group outperforms most software growth stocks.
CHKP stock has a cup base with a buy point of 149.72. The cybersecurity stock has been forming a handle, which would offer an earlier entry point of 145.64. Shares inched up 5 cents Thursday to close at 142.78.
With first-quarter earnings due April 27, investors may want to be cautious. One trading strategy for investors heading into company earnings reports is using call options.
The IBD Computer-Software Security group ranks No. 43 out of 197 groups tracked. The Computer-Software Enterprise group ranks dismal No. 195.
A rival of Fortinet and Palo Alto Networks, Check Point competes in the cybersecurity network firewall market. Firewalls protect computer networks by blocking online intrusions and monitoring web-based apps.
CHKP Stock: Composite Rating Strong
CHKP stock holds an IBD Composite Rating of 87 out of a best possible 99, according to IBD Stock Checkup. Fortinet's CR rating is 97 while Palo Alto Networks is 95.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
"As Q1 reporting season unfolds in the coming weeks we see FTNT, PANW, and CHKP benefiting from an ongoing firewall refresh cycle within the network security arena as well as clients' shift to cloud infrastructure," CHKP stock analyst Shaul Eyal of Cowen said in a recent note to clients.
Analysts estimate that Check Point will report $1.54 per-share earnings, flat from a year earlier. Check Point revenue will rise 5% to $536 million, analysts estimate.
Like Fortinet and Palo Alto Networks, Check Point has shifted to providing cloud computing-based products.
"CHKP's CloudGuard and Harmony subscriptions are showing ongoing double-digit growth (albeit off a small revenue base, $204 million, up 14% year over year in Q4 2021)," Eyal said.
Check Point Pushes Into New Security Areas
In addition, Check Point has pushed into a market called Secure Access Service Edge, or SASE. The security tools support distributed workers and branch offices.
From a macro view, geopolitical events — Russia's invasion of Ukraine — have boosted cybersecurity stocks. One concern is that cyberattacks could be expanded to Western targets after the U.S. and Europe put severe economic sanctions on Russia.
Heading into 2022, CHKP stock analysts said some cybersecurity companies could get a lift from the recently disclosed "Log4j" network vulnerability.
Ransomware remains a big threat, though fewer highly publicized incidents occurred in the back half of 2021.
CHKP stock holds an Accumulation/Distribution Rating of C. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
If you're new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns for issues such as CHKP stock is one key to the investment guidelines.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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