Network Security Stocks May Exceed Expectations (CHKP, FTNT, PANW)

In a new research report, Jefferies has singled out

,

and

as top network security software companies that are doing just fine, even as some other technology companies have struggled of late. In fact, the Jefferies analysts suggest that their top picks in this category could beat third-quarter earnings estimates. Below we take a look at how these three stocks have fared and what analysts in general expect from them. Note that the Jefferies analysts also mentioned

and

in their report. The former is acquiring network security company

and the latter is a potential buyout candidate.

Cowen & Co. analysts also recently featured this Israeli company in a research note. It reports its third-quarter results on October 21. Check Point sports a market capitalization of more than $11 billion, but like the others featured here it does not offer a dividend. Both its long-term earnings per share (EPS) growth forecast and return on equity are more than 18 percent. The number of shares sold short in Check Point represented more than two percent of the float as of the September 30 settlement date, after short interest grew about four percent from the previous period. The average daily share volume has risen in the past two periods. The days to cover was less than four. The consensus recommendation of the analysts surveyed by Thomson/First Call who follow the stock is to buy shares, and it has been for at least three months. Their mean price target, or where the analysts think the share price will go, is more than six percent higher than the current share price. The share price reached a new 52-week high Monday. It is more than 20 percent higher than at the beginning of the year. Over the past six months, the stock has outperformed Cisco Systems and the other competitors featured here, as well as the Nasdaq and the S&P 500.

Last week, Fortinet released what it calls the world's fastest data center firewall appliance. The Sunnyvale, California-based company releases its third-quarter results on October 23, and it has a market cap of more than $3 billion. Its long-term EPS growth forecast is more than 18 percent. The short interest in Fortinet was a little more than two percent of the total float at the end of September. The number of shares sold short grew more than 13 percent from the previous period, and the days to cover inched higher but remained less than two. Of the 25 analysts surveyed, six rated the stock at Strong Buy and another seven also recommend buying shares. The analysts' mean price target indicates that they see more than 12 percent potential upside. Note though that the consensus price target is less than the 52-week high from February. The share price is almost 18 percent higher than six months ago, and about the same as at the beginning of the year. Over the past six months, the stock has outperformed Cisco Systems, Palo Alto Networks and the S&P 500, though it has narrowly underperformed the Nasdaq.

This one is also favored by Cowen analysts, and it posted record results for the most recent quarter. The company is headquartered in Santa Clara, California, and it has a market cap of more than $3 billion. Its long-term EPS growth forecast is more than 33 percent. After declining for four straight periods, the number of shares sold short increased about eight percent to the most recent settlement date. That represented around seven percent of the total float. The days to cover rose from about two to more than three during the period. Of the 26 polled analysts, 15 of them recommend buying shares and none recommend selling. Yet they feel shares have some room to run as their mean price target is more than 23 percent higher than the current share price. That is less than the 52-week high from almost a year ago, though. Shares have faced resistance around $48 since mid-August. The share price is down about 11 percent year-to-date. The stock has not only underperformed the broader markets over the past six months, but Check Point Software Technologies and Cisco Systems as well.