Why This Analyst Is Upgrading Check Point Software, Downgrading These 3 Networking, Security Stocks

Some key networking and security companies are scheduled to report earnings next week. Despite the decline in valuation, some stocks still do not reflect the likely deterioration in financials, according to BofA Securities.

The Networking & Security Analyst: While order trends deteriorated versus last year’s strong results, there are concerns around “slow spending and project pushouts even in areas deemed safe,” BofA's Tal Liani said in a Wednesday note. 

Double Upgrade On Check Point Software

Analyst Liani upgraded the rating for Check Point Software Technologies Ltd. (NASDAQ: CHKP) from Underperform to Buy while raising the price target from $130 to $140.

“While we still believe that Check Point lacks the proper fundamentals for sustained accelerated growth in the longer term, we believe that in the near term the company will be able to outperform on a relative basis given lower expectations and growth acceleration,” Liani wrote.

Check Point Software has given investors “one of the highest levels of visibility and stability over the next few quarters,” he said. 

The Downgrades

• Juniper Networks, Inc. (NYSE: JNPR): Downgraded from Buy to Underperform, target price lowered from $40 to $32.

• Arista Networks Inc (NYSE: ANET): Downgraded from Buy to Underperform, target price reduced from $140 to $105.

A growing risk of capex reduction by Meta Platforms Inc (NASDAQ: META), “would impact Arista’s top-line growth,” Liani mentioned.

• F5 Inc (NASDAQ: FFIV): Downgraded from Buy to Neutral, target price reduced from $215 to $170.

“Given F5’s smaller size and weaker relative supplier leverage versus peers, this [supply chain constraints] could translate into further revenue guidance reductions,” the analyst said. 

Price Action: Check Point Software was trading 2.8% higher midday Wednesday at $127.22, while Juniper Networks was down 1.06% at $28.87, Arista Networks was down 0.12% at $104.62 and F5 was up 1.52% at $153.98.