Investing.com — Shares of Check Point Software Technologies (NASDAQ:) fell more than 1% on Wednesday after Bank of America (NYSE:) downgraded the stock from Buy to Neutral.
BofA raised concerns about the company’s slow growth trajectory and limited upside potential despite recent product investments.
“The highlight of the quarter was weak billings growth of 5.8% year-over-year, below the Street’s 8.2%,” analysts wrote.
However, BofA downplayed the significance of the missed invoices, stating: “We are less concerned about the invoices and believe they will largely recover next quarter.” Instead, they emphasized broader challenges related to the company’s growth.
While Check Point’s Infinity product line grew by double digits and contributed 15% of total sales, BofA remains cautious.
“Growth remains in the mid-single digit range and we think the shares’ further upside potential will be limited until growth prospects improve,” analysts said.
BofA lowered its price objective (PO) from $205 to $195, reflecting the company’s moderate growth profile.
The new valuation is based on ~16x 2026 estimated EV/FCF, down from 18x 2025 estimates. “With the stock up 37% over the last twelve months and trading at a ~15x forward EV/FCF multiple, we believe further upside potential is limited,” the note said.
BofA also expressed doubts about Check Point’s ability to achieve double-digit growth by 2025, citing challenges in accelerating product revenues.
BofA believes that product sales growth must increase from 4% to 20% by 2025 to achieve total sales growth of 10%, which they believe is not feasible in the current market environment.
The company now expects more modest overall revenue growth of 5.6% next year, due to slower subscription growth and limited product expansion.
