Cybersecurity provider FireEye Inc (NASDAQ:FEYE) stock has struggled during the summer. Yet this past summer saw many news stories related to cybersecurity, with hackers aiming at everything from political campaigns to government agencies to major businesses.
FEYE stock is currently being viewed with skepticism by many industry experts. Can FireEye stock find a new footing in autumn, or is it on a fast track to a winter of discontent?
FEYE Stock: Summer Stumbles, Autumn Rumors
FireEye stock has been troubled for a long time; its value has declined by approximately 57% on a year-over-year measurement. David DeWalt’s resignation as CEO in May betrayed evidence that the company’s problems were metastasizing.
The situation became exacerbated with the August release of FireEye stock’s second-quarter earnings report. Although revenue rose year-over-year by 19%, the company’s $175.0 million was below the $178.0 million to $185.0 million in predicted sales. The dreary numbers were post-scripted with more bad news: announced layoffs of 300 to 400 employees as part of a cost-cutting regimen. (Source: “What FireEye’s Stock Crash Says About Hacking,” Fortune, August 5, 2016.)
On August 31, FireEye’s founder Ashar Aziz resigned from the board of directors, where he served since the Milpitas, California-based company’s creation in February 2004. Aziz’s departure brought about speculation that the company was preparing itself as a potential acquisition target. Nomura analyst Frederick Grieb saw this as a positive development, saying
With the loss of the company’s founder, we believe this could position FireEye as a more willing seller. The APT market is becoming crowded, and given the company’s operating losses and a very specialized product, we believe that FireEye may look to evaluate its strategic options more readily.
(Source: “Nomura Dives in on FireEye Inc (FEYE) in Wake of Founder Ashar Aziz’s Resignation,” Smarter Analyst, September 8, 2016.)
On September 22, FireEye abruptly enjoyed a burst of attention following news of a massive cybersecurity breach involving more than 500 million user accounts at Yahoo! Inc. (NASDAQ:YHOO). Although FireEye had no direct connection to the Yahoo story, FEYE stock abruptly shot up 5.21% on heavy trading. (Source: “FireEye (FEYE) Stock Pops on Massive Yahoo Security Breach,” TheStreet.com, September 22, 2016.)
At the same time, rumors that Cisco Systems, Inc. (NASDAQ:CSCO) was considering a takeover of FireEye began to percolate into the media, which may have helped drive the stock upward. (Source: “Renewed Buyout Buzz Fuels Bullish Betting On FireEye Inc (FEYE),” Schaeffer’s Investment Research, Inc., September 22, 2016.)
FireEye Stock Inspires Mixed Feelings
For the most part, industry experts have not been extremely enthusiastic lately about FEYE stock. On August 5, Wunderlich Securities, Inc. analysts rated it “hold” while JPMorgan Chase & Co. (NYSE:JPM) analysts downgraded it from “overweight” to “neutral.” A September 22 analyst round-up found 22 ratings as “hold,” five as “buy,” four as “strong buy,” and none as “sell.” (Source: “FireEye Inc (NASDAQ:FEYE) Analysts Recommendations and Insider Trading,” The Independent Republic, September 22, 2016.)
Separately, the institutional investor Terril Brothers, Inc. offered a major rejection of confidence by dropping 67.8% of its FEYE holdings, selling 420,625 shares while retaining 199,810 shares of the technology company at the end of the second quarter. (Source: “Filings Worth Watching: As Fireeye INC (FEYE) Valuation Declined, Terril Brothers Inc Decreased Position by $7.15 Million,” Chester Independent, September 30, 2016.)
FireEye will release its third-quarter earnings after market close on November 2, and industry experts are forecasting earnings per share (EPS) of -$0.31; the current consensus range is -$0.33 to -$0.29, with a consensus range for revenue of $174.97 million to $185.48 million, with an average of $182.66 million. (Source: “FireEye, Inc. (NASDAQ:FEYE) earnings expectations,” The Independent Republic, September 9, 2016.)
The Takeaway Regarding FireEye Stock
The wild card in FireEye’s future is the role that David DeWalt’s successor as CEO, Kevin Mandia, will have on the company. Mandia founded Mandiant, a computer forensic firm that FireEye acquired two years ago. So far, Mandia has been mostly a low-profile figure and his efforts to reconfigure the struggling company have not caught the industry’s attention.
If Mandia is able to streamline and refocus FireEye, the company may be able to recapture its groove. And if current events are any indication, there is no shortage of the need for cybersecurity expertise. But if FEYE stock is going to be attractive, it is incumbent on Mandia to stamp out the continuing rumors that FireEye is being readied for a takeover. If FEYE is going to gain respect, the company needs to send the message that it is going to be around for the long haul and playing on its own turf.