Buy CHKP Call Options on Consistent Quarterly Outperformance

I have about two more cybersecurity stocks to cover in my revision of the series titled “Cybersecurity Stocks on the Move”. In today’s piece, the options of Check Point Software Technologies (NASDAQ:CHKP) has our attention as we explore possibilities in the cybersecurity space.

Check Point Software Technologies with its market capitalization of $15.71B develops, markets and supports a range of products and services for IT security. The products and services are sold to enterprises, service providers, small and medium-sized businesses and consumers. The Company offers its customers a portfolio of network and gateway security solutions, data and endpoint security solutions and management solutions.

Previous Coverage on CHKP Options

On February 11, I wrote about trading the options of Check Point Software Technologies. In that piece, I talked about the impressive financials and optimistic outlook that the company posted after its third quarter earnings result.

I talked about the company’s innovative security solutions and I laid emphasis on the launch of the ThreatCloud IntelliStore and the new 600 Appliances.  I recommended bullish CHKP option trades and I gave the stock a $78.65 price target by when I recommended the CHKP Apr 2015 75.000 call at an asking price of $3.65.

Performance in 3 Months

When I wrote the aforementioned February piece, the shares of Check Point Software Technologies were trading around $75 per share. Interestingly, the shares of Check Point have soared to record a new 52-week high of $88.49, ten weeks after the initial coverage. As at market close last yesterday, the shares of Check Point have gained 15.61% from that February coverage to close at $86.71. The options contract that I recommended also yielded gains because the shares of Checkpoint were already trading around $88 per share at the time of its expiration.

Why Are We Looking at Check Point Software Technologies Today?

Check Point Software Technologies released its first quarter (Q1 2015) results on April 20 and the company’s financial performance has been a catalyst for a rally ever since. Nonetheless, the shares of Check Point dipped 0.17% yesterday and I think that the dip offers options traders a unique opportunity to snag up winning CHKP call options at a discount.

Highlights of that first quarter results are presented below:

Check Point Software Technologies reported first quarter earnings per share of $0.86 to beat the consensus estimate of $0.84 and to mark a 10.2% year-over-year increase. It might interest you to know that Check Point Software Technologies has consistently beaten earnings estimates in the last 11 quarters, and it has beaten estimates in 19 out of the last 20 quarters.

The company reported revenue of $372.6M to beat the consensus estimate of $370M and to make an 8.9% year-over-year increase. The company reported an 11.2% increase in revenue from Products & Software, a 6.6% increase in revenue from Software Updates & Maintenance, and a 20.4% increase in revenue from Software Bladed subscription.

How to Trade CHKP Options

Check Point Software Technologies is set to release its second quarter results on July 21, and I strongly believe that bullish trades will be rewarded within the next two months. For one, Check Point has guided optimistically for the second quarter, and its history of outperformance suggests that we can expect excellent results.

Check Point expects to report second quarter EPS between $0.90 and $0.99 per share above the consensus of $0.87 per share. The company expects revenue between $380M and $400M, above the consensus of $391M. I am bullish on Check Point Software Technologies and I recommend that you buy CHKP call options. I am especially interested in the CHKP Jul 2015 87.500 call (CHKP150717C00087500) at an asking price of $2.10.

 

 

— Daily Option Alerts

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