Check Point Bearish Bets Jump: Israel Overnight
Options traders are boosting bets by the most since 2004 that Check Point Software Technologies Ltd. (CHKP) will extend its New York drop after the world’s second- largest maker of network security gear reported slower revenue growth.
The ratio between put options to sell Check Point’s shares relative to calls to buy rose to an eight-year high last week of 1.12-to-1, up from 0.4-to-1 last year, according to data compiled by Bloomberg. The Tel Aviv-based company sank 5.1 percent to $60.76 in New York yesterday, the second-biggest decliner on the Bloomberg Israel-US Equity Index (ISRA25BN) of the largest Israeli companies listed in the U.S.
Bearish wagers on Check Point are growing after the company reported slower growth in the first quarter for sales of product licenses and didn’t raise guidance for this year, according to Oppenheimer & Co. and ThinkEquity LLC. Product licensing increased 5 percent from last year, after growing 13 percent in 2011, according to data compiled by Bloomberg.
“The product revenue growth decelerated to mid-single digits and that’s really sticking out as a big question mark,” Daniel Cummins, an analyst at ThinkEquity, said yesterday by phone in New York. “Is this a period of choppiness or is this a new situation that we’ll see going forward?”
Put options expiring in May with a $60 strike price, which is six percent below the close on April 20, were the most owned and accounted for about half of the put contracts outstanding, data compiled by Bloomberg show.
Check Point reaffirmed its forecast for the year, Chief Executive Officer Gil Shwed said yesterday in the earnings call.
“Investors likely are concerned with full-year 2012 guidance being kept intact rather than upped, and product license revenue growth of 5 percent year-on-year potentially indicating decelerating growth in 2012,” Shaul Eyal, a technology analyst at Oppenheimer & Co. in New York, wrote in an e-mailed report yesterday.
The company reported adjusted earnings of 74 cents per share, beating the 72-cent median estimate of 27 analysts surveyed by Bloomberg.
Check Point will probably report sales of $324 million to $336 million in the second quarter, as the company is benefiting from growing demand for its technology used to defend computer systems, Shwed said.
Sony Corp. (6758), the world’s second-largest maker of video-game machines, saw its worst hacker attacks in April, when intruders compromised more than 100 million customer accounts in the second-largest on-line data breach in U.S. history.
Investors should buy shares of Check Point following yesterday’s decline, Shebly Seyrafi, an analyst at FBN Securities, wrote in an e-mailed report yesterday, raising his price estimate for the company’s stock to $75 from $70. The company’s revenue from software and appliance sales will result in higher sales, he said.
Check Point shares advanced 22 percent this year before yesterday’s drop, sending valuations to 20 times estimated earnings, higher than the 15 average multiple for companies on the Nasdaq Composite Index.
“The quarter was in line and for an expensive stock, that doesn’t cut it these days,” Robert Breza, an analyst at RBC Capital Markets, said by telephone from Minneapolis yesterday. “Expectations were too high.”
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.
Israeli and foreign venture capital funds invested a total of $483 million in the first quarter of 2012, up from $479 million in the same period last year, the IVC Research Center said yesterday in an e-mailed statement. Foreign fund investments were $236 million, the highest amount in over a decade, Marianna Shapira, IVC Research Manager, said by phone from Tel Aviv today.
U.S. stocks joined a global sell-off yesterday as French President Nicolas Sarkozy trailed challenger Francois Hollande in the first round of the nation’s presidential elections while Dutch Prime Minister Mark Rutte offered his cabinet’s resignation, intensifying concern about Europe’s sovereign debt crisis. The Standard & Poor’s 500 Index fell 0.8 percent and the Nasdaq Composite Index declined 1 percent.
The Bank of Israel kept the benchmark interest rate unchanged for a third straight month amid renewed European debt concerns. The central bank’s monetary policy committee, led by Governor Stanley Fischer, held the rate at 2.5 percent, the Jerusalem-based central bank said on its website yesterday. All 23 economists surveyed by Bloomberg News predicted the decision.
The benchmark TA-25 Index (TA-25) rose 0.7 percent to 1,156.78 at 10:22 a.m. in Tel Aviv.
Allot Communications Ltd. (ALLT) fell 0.9 percent to $23.45 in New York yesterday. The shares in Tel Aviv rose 0.6 percent to 89.09 shekels, or the equivalent of $23.68.
The Hod Hasharon, Israel-based maker of networking equipment is in negotiations to buy Ortiva Wireless Inc., daily TheMarker reported, without saying how it obtained the information.
Justine Schneider from Calysto Communications, an external investor-relations company that represents Allot, declined to comment when contacted by Bloomberg News.
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