Check Point vs. Palo Alto Network: Which Cybersecurity Stock is a Better Buy?
March 18, 2021 at 06:29 AM EDT
Cybersecurity spending is expected to increase at a double-digit rate over the next decade. Two of the top companies in this space are CHKP and PANW. Patrick Ryan gives his take on which is the better pick.
The primary threat to business operations is no longer a physical break-in on-site. Rather, business founders and CEOs lose sleep at night worrying about potentially crippling digital attacks. This is precisely why cybersecurity stocks belong in every investor’s portfolio.
The cybersecurity services providers who safeguard websites and online operations are receiving that much more attention with each passing day as the digital transition continues. The tech developed by these companies will prove vitally important to providing truly safe and efficient business transactions as time progresses.
Based in Tel Aviv, Israel, CHKP provides IT security solutions to businesses and others across the globe. CHKP software and hardware products bolster IT security by connecting to operating systems, servers, virtual desktops and computers. CHKP stands to benefit from the fact that the cybersecurity market is growing at a compound yearly rate of nearly 10%, meaning it will break through the $300 billion benchmark within half a dozen years or less.
CHKP's brass is wise to diversify its business, shifting away from legacy hardware firewalls toward cybersecurity that safeguards on-site and also in the cloud. CHKP recently acquired the cloud access company known as Odo Security, resulting in a solution dubbed "Harmony" that empowers remote workers to access computing environments in a completely secure manner.
CHKP has also bought back its own shares on a consistent basis across recent years, meaning the company is rich in cash. All in all, CHKP's diluted shares have decreased from around 209 million in '12 to 138 million in the prior quarter.
CHKP POWR Ratings
CHKP has a POWR Rating grade of B meaning it is a Buy. The stock has an A grade in the Quality component along with a B grade in the Value component. Investors who would like to know how CHKP fares in the remaining Momentum, Sentiment, Stability and Growth POWR Ratings components can find out by clicking here.
Of the 25 stocks in the Software - Security industry, CHKP is ranked 7th. You can learn more about the publicly traded companies in this space by clicking here.
CHKP According to the Analysts
The analysts believe CHKP has a bright future, establishing an average price target of $130.64 along with a high price target of $153. If CHKP hits the average price target, it will have increased by around 15%. It is particularly interesting to note of the 30 analysts who have issued recommendations for the stock, three view CHKP as a Strong Buy, two consider it a Buy and 21 consider it a Hold.
This digital security specialist provides network security services to private enterprises as well as governmental entities. The overarching aim of PANW's products and services is to facilitate the safe and effective enabling of applications running on networks.
PANW has a C POWR Ratings grade along with C grades in the Quality, Growth and Sentiment components. Click here to find out how the stock grades out in the Value, Stability and Momentum components.
Of the 24 stocks in the Software - Security industry, PANW is ranked 12th. Click here to find out more about the stocks in this space.
The Analysts’ View of PANW
The analysts are not as bullish on PANW as they are on CHKP. The analysts' average price target for PANW is $319.59, meaning the stock has 10% downside potential. However, the analysts' high target price for the stock is $270. The low target price for PANW is a full $100 less at $270.
The analysts are a bit bearish on PANW as the stock might be overpriced at its current level. There is an argument to be made the stock is priced a bit high considering its forward P/E ratio is hovering around 60. In general, a reasonable forward P/E ratio is around 25 yet some insist P/E ratios are not as important for explosive, growth-oriented tech stocks priced years or even decades into the future.
The Better Pick?
If you are scared off by elevated P/Es, CHKP is clearly the better pick of these two cybersecurity stocks. CHKP is also favorable considering it is ranked five slots higher than PANW in the Software - Security industry. Add in the fact that CHKP's POWR Ratings components generally grade out higher than those of PANW and there is all the more reason to favor CHKP.
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PANW shares were trading at $325.67 per share on Thursday morning, down $11.25 (-3.34%). Year-to-date, PANW has declined -8.36%, versus a 5.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.Check Point vs. Palo Alto Network: Which Cybersecurity Stock is a Better Buy? appeared first on StockNews.com