Check Point’s Subscription Momentum Continues Amid Product Headwinds in Q2; Maintaining $132 FVE

We are maintaining our $132 fair value estimate for narrow-moat Check Point Software Technologies after its second-quarter results. Matching our expectations, the company produced 4% year-over-year revenue growth, while less aggressive spending led to higher-than-anticipated adjusted earnings of $1.61. The accelerating security subscription growth more than offset the worsening results from products, and we expect this momentum to continue leading the way. Billings growth also hastened, with 9% year-over-year expansion amid a tough comparison of 7% in the prior year’s quarter. While we see positive indications from the results, the tepid outlook matched our expectations. We remain cautiously optimistic that Check Point will ramp its development, sales, and marketing efforts to spur growth more in line with peers and see shares as slightly undervalued.