The market beat down the company's stock by 15 percent today, despite the fact that the company turned a better-than-expected quarterly performance.
Check Point's stock closed at $25.37 yesterday, down $4.75 from the previous day. The stock is up 62 cents today in midmorning trading. Check Point, which went public June 27 at $14 a share, reported its third-quarter earnings after Monday's market close.
Check Point posted net earnings of $3.7 million, or 10 cents a share, for the quarter ending September 30, compared with $1.6 million or 5 cents a share for the same quarter last year.
Check Point also reported Monday that it had been sued by Checkpoint Systems, a New Jersey manufacturer of theft prevention devices, for infringing on a trademark with its name. The suit seeks an injunction and unspecified damages. The firewall firm said it would contest the lawsuit.
In addition to making money, Check Point reported that quarterly revenues jumped more than threefold, up to $8 million from $2.6 million last year.
But that performance wasn't enough to please some investors. "To some people, being ahead of the numbers isn't good enough," said senior analyst John Powers of Robertson Stephens. "Some were expecting a bigger blowout and decided to sell."
Goldman Sachs Internet analyst Michael Parekh echoed that view. "Today's price action was a little profit-taking, as we've seen in a number of cases in the last few weeks with other stocks, too."
Check Point professed to be baffled by the buffeting its stock took in the market after the positive earnings report. "We can't speculate on what occurs among our investors," said Emily Cohen, Check Point's director of corporate communications.
Goldman Sachs's Parekh could find no fault in Check Point's quarter, which included 40 percent gross profit margins and topped his earnings estimates. "They executed well in terms of expanding distribution channels, especially in the United States among resellers and [original equipment maker] relations."
Stocks of companies that provide security technology for the Internet and Check Point in particular have in general outperformed the Internet software group over the summer, an abysmal period for most public Internet companies, Parekh said.
"People do view security as being an essential element in commercialization of the Internet, especially with the intranet trends," he said.
Even so, Wall Street analysts praised their recent earnings reports. Check Point just seems to have been unlucky by going last.
"They all exceeded analyst expectations. In the case of Raptor, its stock ran up in the week to prior to reporting the quarter's results and pretty much held at the higher plateau," Powers said. "Check Point ran up, then gave a lot back when it reported."