FEYE Stock: Is FireEye Inc a $50 Stock in Disguise?

FEYE StockCould FEYE Stock Skyrocket?

FireEye Inc. (NASDAQ:FEYE) is a heavyweight in the most important industry to emerge from the digital age. Yet FEYE stock has taken a beating in the last 12 months, falling more than 58%. What’s going on here?

Sometimes it’s really hard to figure out what’s driving a stock lower. This isn’t one of those times. We can quite clearly pinpoint the anchor on FireEye stock, since the same weight is dragging down the entire sector.

It all comes back to one report.

That report was drawn up by International Data Corporation (IDC). It sent a warning that scared the heck out of most investors. The IDC analysts claimed that clients were going to cut their technology spending in 2016, mostly because of market uncertainty. (Source: “Worldwide IT Spending Expected to Post Significant Slowdown in 2016, with China Set to Post its First-Ever Decline, According to IDC,” International Data Corporation, February 17, 2016.)

As the global economy teeters on the edge of another recession, businesses are worried about a slowdown in sales. And let’s be honest, it’s at those times that companies scale back non-essential spending. Since many of them think of technology upgrades as a luxury, it’ll be among the first things to get slashed.

Now does it make sense why FEYE stock fell from $54.66 to $18.21? The cloud of pessimism actually translated to a genuine outflow of capital from FireEye.

I think it’s utterly ridiculous and here’s why…

FireEye is a major player in a young industry. It has a market cap of nearly $3.0 billion, which I think qualifies it as a market incumbent and incumbents always win in a market pullback. History is littered with examples, but the best one is in banking.

The big banks (JPMorgan Chase, Citigroup, Bank of America, etc.) had consolidated a lot of power and wealth between them. A lot of their actions led to a horrific financial crisis, yet they still came out on top. Reports show that their market share actually increased after the financial crisis. They got even bigger after the collapse than they were before the collapse.

I’m fairly certain the corporate technology market could follow the same pattern. The need to protect intellectual property from cyber theft is not going to disappear or shrink; it’s only going to become more important, as hackers learn newer tricks to steal information.

There are vast oceans of data that remain unprotected. So if you look beyond the next few months, it’s almost a certainty that companies like FireEye will be in demand. A minor setback in the short-term just creates a convenient opportunity for investors.

Since FEYE stock was trading near $55.00 less than a year ago, I see it bouncing back to at least $50.00 in the next year or so.