The Best Case for FireEye Stock
Of all the cybersecurity stocks out there, FireEye Inc (NASDAQ:FEYE) is the one that caught my interest lately. FEYE stock doesn’t crack the top five in terms of size, but four analysts just boosted their price targets on the stock. What’s going on here?
Well, let’s take a look at what’s been weighing on FEYE stock.
The company had been a Wall Street darling, the technology firm that had no bounds. But after a few quarters of widening losses and slowing growth, FireEye fell out of favor. The company had lowered full-year guidance one too many times. (Source: “FIREYE: How A Red-Hot Wall Street Darling Turned Into One Of The Biggest Disasters On The Market,” Business Insider, May 7, 2014; http://www.businessinsider.com/wall-street-darling-fireeye-has-crashed-2014-5.)
As a result, FireEye stock saw double-digit losses on more than one day. It’s currently sitting at $18.11, which is a long way from its previous high of $85.64 back. That was back in early 2014. The share price continued to fall even though the bleeding slowed in third quarter of 2015.
But one data point isn’t enough to make a trend. I wasn’t convinced that FireEye was truly bound for a comeback until the fourth-quarter results came out. That was on February 11. The company had started to meet expectations again. (Source: “FireEye Reports Record Billings and Revenue for Fourth Quarter and Fiscal Year 2015,” FireEye Inc Investor Relations, February 11, 2016.)
It was even hopeful for positive operating cash flow later this year. All told, FireEye was starting to look and feel like a well-run company again, despite firmly being in the red. FEYE stock went from $12.41 at the time earnings came out to $18.11 at the time of writing.
Now the stock is due for some really big gains. FireEye came out and said it would turn profitable by 2017. That’s a really bold statement for a company to make, especially when its performance has been crumbling. What makes FireEye so optimistic?
Personally, I think it’s the shift towards Software-as-a-Service (SaaS). Rather than dole out appliances that would require constant upkeep, FireEye is transitioning to a SaaS model. The company wants to offer secure e-mail services, mobile threat detection, and fraud analytics software as something customers can access online. (Source: “FireEye Sees Profits In 2017 Amid Key Subscription, SaaS Transition,” Investors.com, March 9, 2016.)
The shift has caught a lot of analysts’ attention. I’m bullish on FEYE stock before all the gains are gone.