Cybersecurity Giants Examined: Varonis and Check Point in the Wall Street Spotlight

Trading on Wall Street on Friday was mixed, with slight gains in the Dow Jones and S&P 500 indices, while the Nasdaq index declined. Overall, the trend for Thursday and Friday was negative, with declines of 0.5%–2.8% in the leading indices. These are the Israeli stocks (and those with ties to Israel) that stood out in trading:

Check Point: Will the financial reports improve sentiment for the stock?

Check Point shares rose 3.6% on Friday, but ended the trading week down 4.8%. Although the stock has recovered and risen about 16% since the low it hit at the end of April, it still shows a negative return of 29.6% since the beginning of the year. Check Point trades at a valuation of $13.3 billion on the Nasdaq.

The cybersecurity company, managed by Nadav Zafrir, will release its financial reports for the second quarter this coming Thursday. The analyst consensus is for revenue of $675 million, reflecting modest growth of 1.5% compared to the same quarter, and a net profit (Non-GAAP) of $2.45 per share, an increase compared to $2.37 in the same quarter.

Last week, in a review published by Cantor investment bank's cybersecurity analyst, Jonathan Ruykhaver, ahead of the sector's company reports, he identified challenges at Check Point and wrote that it is struggling to acquire new customers despite aggressive attempts. In his assessment, the company is underperforming among corporate customers, alongside stability in the growth of small and medium-sized customers.

Jefferies also published a review ahead of the reports. Analyst Joseph Gallo mentioned the challenges and changes in the go-to-market organization that affected the previous quarter's results and the stock's weakness. According to him, the company received a "yellow card" then, and to avoid a "red card" it will need to present billings in line with the consensus, something that seems achievable to him thanks to an improvement he identifies from the previous quarter and price increases. In Gallo's assessment, to lead to a significant positive response in the stock, the reports need to show low single-digit growth in billings and establish confidence in the ability to accelerate growth in the third quarter. He continues to recommend it with a "buy" rating at a target price of $160, a premium of 22.5% over the price on the Nasdaq.

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Market awaits Varonis reports and news about a possible sale

Another cybersecurity company from Israel that will release reports this week is Varonis, whose results will be released on Tuesday after the close of trading on Wall Street. The analyst forecast is for revenue of about $177 million for the quarter, growth of 16.3% from the same quarter, with a net profit of one cent per share (Non-GAAP), a decrease from 3 cents in the same quarter.

Varonis, managed by co-founder Yaki Faitelson, trades on the Nasdaq at a market cap of $5.4 billion. Last October, the stock plummeted after the company surprised negatively with a reduction in annual forecasts, and subsequently the stock continued to weaken to an annual low of just over $20 last April. However, the stock has since risen 127%, mainly since it was reported last month that the company might be sold to a private equity fund, and among those interested are the funds Blackstone, Thoma Bravo, and Vista. So far, no new official report on the matter has been published.

Varonis provides solutions for data protection and management in organizations. According to Wall Street Journal data, there are currently 26 analysts covering Varonis, of which 18 are positive, 6 neutral, and 2 negative. Cantor raised the target price last week from $35 to $55 (a premium of about 20% over the price today) and remained with an "outperform" rating. They expect a lukewarm quarter, but note that at an EV/Sales multiple of 6.9 for this year, compared to 7.5 for similar companies, there is room for multiple expansion.

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Global-e stock rose following a target price increase

Global-e stock has been trading relatively volatile over the past year. For example, last Friday the stock jumped 5% after showing declines in the previous trading days of the week. Note that a little over two months ago the stock reached an annual low from which it has risen 31.5%.

Global-e, managed by one of the company's founders, Amir Schlachet, is a fintech company whose solutions are intended for cross-border online commerce. The company trades on the Nasdaq at a valuation of $6.1 billion. The American investment bank, Truist, raised its target price for Global-e stock at the end of the week by $2, from $39 to $41, and remained with a "buy" rating on the stock. The new target price of Truist reflects a premium of 13.2% over the Global-e stock price at the end of the week.

The target price increase came as part of a broader review by the bank of fintech stocks, which the bank notes are currently enjoying better performance after several years of underperformance, partly thanks to mergers and acquisitions.