FireEye Stock Jumps on Earnings Beat
I’ve been patient, dear reader…very patient. Not all investment theses work out instantly, so when FireEye Inc (NASDAQ:FEYE) lagged behind my expectations, I decided to keep faith. Now it seems like my belief in FEYE stock is being rewarded.
The FireEye stock price got a significant boost after FireEye earnings came out on August 1, 2017.
Encouraged by the company’s better-than-expected revenue, investors sent the share price up by as much as six percent during the next trading session. Some of those gains were pared later in the week, but the underlying trend is clear: FireEye is starting a bullish run.
I’ve been predicting this turnaround for over a year, so it’s gratifying to see other analysts start to catch on. You can hardly blame them, though. Initial estimates, including those from FireEye, suggested that the company would lose $0.12 per share on $176.4 million in revenue.
Boy, were they wrong.
In reality, the company only lost $0.04 per share, and on $185.5 million in sales no less!
Although it seems strange to cheer a net loss, what matters is that FireEye earnings are moving in the right direction. Considering the company lost $0.33 per share in the same quarter last year, its progress is quite impressive.
The quarterly results were so good that FireEye even extended its full-year forecast from between $724.0 million and $736.0 million to between $734.0 million and $746.0 million.
Also Read: Top Cybersecurity Stocks for 2017
If you’re holding out for visual confirmation on FEYE stock’s resurgence, then look no further than this chart.
Chart courtesy of StockCharts.com
FireEye’s 50-day moving average broke above its 200-day moving average for the first time in nearly 18 months. This is what technical analysts call a “golden cross.” It is supposed to indicate the emergence of a bullish trend.
While I respect technical analysis, I don’t usually rely on it for investing decisions. However, when the fundamentals, narrative, and technical charts are in agreement, I would be an idiot to avoid the truth.
How FireEye Pulled Off This Turnaround
I’m ecstatic to see FEYE stock in acceleration mode. As I said before, this reversal is a long time coming, both for the company and the industry at large.
For FireEye, specifically, the pivot began when Kevin Mandia took over as captain. You remember Mandia, don’t you, dear reader?
His firm traced the cyberattack on Sony Pictures back to North Korean operatives. And before that, Mandia put together a legendary 60-page report proving that China was hacking U.S. companies. Heck, Fortune magazine put him on the cover of their July 2013 issue, making him possibly the most famous man in cybersecurity (other than Edward Snowden or Julian Assange of course).
I took a second look at FireEye stock immediately after Mandia became CEO.
The stock was trading in the doldrums, at bargain-bin prices. It was exactly the kind of situation I look for, because Warren Buffett’s words are etched deep in my memory: “Be greedy when others are fearful, and be fearful when others are greedy.” This situation certainly smelled of fear.
But then the turnaround dragged on and on…I started to doubt…until this quarter, when we finally saw my earlier predictions come to fruition. This is a major inflection point for FEYE stock.
It is, at the same time, going to be huge for cybersecurity stocks across the board.
When it comes to emerging technologies, there tend to be spillover effects when a market leader outperforms. Investors get a precedent of what success looks like, which inspires greater confidence from them. That confidence translates to bullish momentum, which ultimately provides early investors with outsize gains.
It’s hard to catch companies on these upswings once they’ve traded on the stock market for a few years, but I think cybersecurity is perfectly positioned for such a rise.