(By Balaseshan) UBS Securities analyst Brent Thill increased his price target on shares of Check Point Software Technologies Ltd. (NASDAQ:CHKP) to $69 from $68 while maintaining "Buy" rating.
After the company's first quarter results, the brokerage raised its 2012 EPS estimate to $3.21 from $3.20, while lowering its revenue estimate to $1.386 billion from $1.396 billion and its billings growth forecast to 9.5% from 11.8%. The firm reduced its 2013 revenue growth estimate to 10.5% from 11.5%, while maintaining its EPS estimate of $3.57.
Thill said his industry checks remain healthy so he chalks up product miss on Q1 seasonality and on the margin increased competition.
However CHKP has remained highly innovative so product revenues should accelerate post Q1 blues and ST deferred down 1.1% sequential was in-line with 4-year seasonal down 1.0% so the billings miss came predominately from volatile long-term deferred. CHKP remains a good growth story with the potential to more aggressively distribute cash to shareholders in 2013.
Thill said his fiscal 2012 adjustments include: product revenue post Q1 miss to up 5.5% year-over-year from up 9.5% partially offset by annuity revised to up 15.0% from up 13.9% prior on continued strong annuity software blade sales.
The analyst believes bias is to upside on product revenues. EPS up $0.01 on margins down 20 basis points versus down 100 basis points prior (Q1 margins up 160 basis points versus his model).
Thill said his other key takeaways are Q1 may have been negatively impacted to a degree by customers pausing appliance purchases ahead of GAiA OS (launched last week), pent-up demand could be incremental for fiscal Q2.
Thill said Europe down 17% sequential was weak versus seasonal down 14%, the region remains highly variable by country though the fiscal Q2 forecast looks positive. Blades were on a $200 million run-rate exiting fiscal 2011 and growing 30%-plus year-over-year.
Check Point Software develop technologies to secure communications and transactions over the Internet by enterprises and consumers. Check Point develops, markets and supports a range of software, as well as combined hardware and software products and services for information technology (IT) security.
CHKP is trading up 0.03% at $59.82 on Wednesday.