Security Software Is Booming, Goldman Sachs Says. Why It Downgraded Crowdstrike and Check Point.

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Sept. 13, 2021 11:36 americium ET

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Essex said Check Point's rivals successful the firewall concern are increasing faster than it is.

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Stock successful CrowdStrike Holdings and Check Point Software Technologies headed little aft Goldman Sachs security-software expert Brian Essex offered an upbeat presumption of the assemblage but chopped his ratings connected the 2 firms’ shares.

“Now is the clip to ain information software,” Essex said successful a probe note. Financial results for the 2nd quarter provided “evidence that integer transformation, enlargement of onslaught surfaces, an elevated menace environment, and wide publicized information incidents proceed to thrust accelerated request for adjacent gen security,” helium said. The radical is seeing “one of the astir important firewall-related spending cycles we’ve seen successful years,” Essex said. 

Essex said his favourite names successful the radical see SentinelOne (S), which focuses connected endpoint security; Ping Identity (PING), successful the identity-management sector; Palo Alto Networks (PANW), successful network security; AvePoint (AVPT), successful information security; and Tenable (TENB), successful vulnerability appraisal and management. He besides has Buy ratings connected Okta (OKTA), Rapid7 (RPD), SailPoint (SAIL), and Verint (VRNT).

On Check Point (CHKP), though, helium reduced his standing to Sell from Neutral, lowering his people for the banal terms to $121, from $133. Check Point shares were down 1.9% astatine $118.88 successful greeting trading.

Essex noted that the company’s rivals successful the firewall conception are increasing faster than it is. “While firewall request remains robust arsenic seen by Check Point’s peers’ quality to accelerate into the precocious 20 percent to debased 30 percent range, connected the contrary we are seeing Checkpoint maturation stay successful debased azygous digit territory,” helium wrote.

CrowdStrike (CRWD), Essex said, was 1 of the fewer players successful the radical to amusement year-over-year deceleration successful the latest quarter. He said that portion helium expects CrowdStrike to execute good and has an accidental to summation marketplace share, helium downgraded the banal to Neutral from Buy due to the fact that that stronger show appears to beryllium already reflected successful the banal price.

Essex kept his $305 terms people connected the stock. The shares were down 3.5% astatine $252.74.

Essex besides has Sell ratings connected Secureworks (SCWX) and Qualys (QLYS). “We are cautious connected platforms that are losing share, person execution challenges, and/or wherever companies person nether invested successful emerging exertion and level expansion,” helium said.

Essex says that Check Point, Secureworks and Qualys each autumn into that category. “These companies are showing akin trends of gross deceleration, and we expect incremental borderline compression up arsenic they walk to drawback up with peers successful their respective information segments,” helium said.

Write to Eric J. Savitz astatine eric.savitz@barrons.com

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