Why is Check Point the only stock missing out on the cybersecurity market rally?

A number of prominent stocks in the cybersecurity sector have shown high returns since the beginning of the year. Fortinet, for example, has doubled its value, Palo Alto has jumped by 80%, and shares of Okta and CrowdStrike have added over 60% to their value. An ETF in the sector, First Trust NASDAQ Cybersecurity, has also risen by almost 30%.

In contrast, Check Point shares are lagging behind, with a negative return of 31.5% year-to-date, and the financial reports published last week did not change the trend. As Cantor bank's cybersecurity analyst, Jonathan Ruykhaver, put it: "The quarter's results were not enough to ease concerns related to execution."

Check Point did beat the profit forecast in the second quarter, but recorded revenue lower than expected and presented a lukewarm forecast for the third quarter, in which it expects revenue of $655–685 million and a net profit of $2.43–2.53 per share. The company emphasized that the third quarter marks the bottom and the fourth will be stronger, but it seems the market is waiting for clearer signs of recovery.

$7 billion evaporated

Check Point has been managed since the end of 2024 by Nadav Zafrir. When the company announced his appointment two years ago, the stock jumped and the company's value rose above $20 billion, but it has since weakened and is currently trading at a value of $13.1 billion. In the previous quarter, Check Point revised its annual revenue forecast downward due to changes in its go-to-market sales organization, and these changes also negatively affected the second-quarter results.

Analyst Joseph Gallo from Jefferies wrote before the latest reports that these changes led to a "yellow card" from the market for Check Point. After the reports, Gallo wrote that the company is trying to avoid a "red card" by presenting orders in line with the consensus, but added that it continues to experience pressures from the changes in the sales organization. In his estimation, the delay in recovery until the fourth quarter increases execution risks.

Looking to the next quarter

In a conversation with reporters on Thursday, Zafrir addressed market expectations and Check Point's conservatism in making acquisitions, an approach that has not changed under his management. Zafrir said:

"I understand there is an expectation for big and flashy moves in a short time. We have our own direction, and acquisitions as acquisitions are not the company's goal — we will continue to work according to a vision and strategy. We are not resting on our laurels."

According to him, Check Point is recruiting hundreds of new sales representatives all over the world, including in Israel. "We are stabilizing the system," he said about the sales organization. Zafrir also added: "We are optimistic about the second half of the year and especially the fourth quarter. Later on, the new products and the double-digit increase in the sales force will have an impact from 2027."