Guggenheim Flags Software Sector at Three-Year Lows, Recommends Buying Check Point
CHKP•Guggenheim analyst warns that AI-driven market fears have pushed software sector valuations to three-year lows and recommends overweighting names like Check Point Software, citing its 82% recurring revenue base. A second strategist upgrades software to strong buy, projecting a 15% total return over the next 12 months.
1. Software Sector Valuations Hit Three-Year Lows
An AI-driven sell-off has driven software stocks down sharply, with sector valuations falling to levels not seen since 2023. The decline stems from concerns over legacy vendors’ ability to adapt to generative AI competition, creating perceived buying opportunities.
2. Check Point’s Recurring Revenue Strength
Check Point Software stands out with an 82% recurring revenue model in cybersecurity, offering predictable cash flows that analysts view as a defensive hedge. Its strong subscription renewals and low churn rate underpin the overweight recommendation.
3. Upgrade to Strong Buy and Return Forecast
A second strategist has upgraded the software sector to strong buy, forecasting a 15% total return over the next 12 months based on resilient cloud security demand. Analysts highlight improving R&D investments and expanding enterprise AI security budgets as key drivers.
