As my followers would know, I have been bullish on the entire cyber security sector for quite some time, and my bullish stance has resulted in big profits. Of the multiple cyber security stocks I have recommended over the past few months, FireEye (FEYE, Financial) has been my favorite and has appreciated over 20% on average.
While I still believe the prospect on the entire industry is bright, I think investors should consider booking some profits and watch the stock from the sidelines for a better entry-point.
A good stock
FireEye’s shares were down around 35% in 2015 mainly because of the departure of the company’s CFO Mike Sheridan and its underwhelming quarterly reports. Although the stock has declined over 80% from its all-time highs, investors who caught the falling knife at the correct time are currently enjoying big profits.
FireEye has acquired some significant firms which will help the company to move forward. The company acquired nPulse Technologies in May 2014, a privately-held network forensics company, for $56.6 million. nPulse helped the company analyze a cyber-attack as well as their effects on the network. nPulse was already a companion of FireEye before the acquisition. It appears that the company profited from the partnership with nPulse. The blend of nPulse and Mandiant offers the company a large-scale security framework.
FireEye’s recent acquisition of Invotas and iSIGHT Security is predicted to add nearly $60 million to $65 million to this year's billings and around $55 million to $60 million to this year top-line. It can single-handedly result in approximately 8.15% and 8.63% surge in the billings and revenue, respectively, on an annual basis.
The company also said that it strategies to integrate the security orchestration capabilities from Invotas into its worldwide threat management platform, which will help the company to swiftly recognize the attack.
Model shift
Acceptance of interactive analytics accounts for major technology trend in the cyber security sector. The same technique is used by majority of the cyber-attacks. This technique is becoming more popular with time and security outlook to it is becoming more mechanical.
Another technology trend in the cyber security sector is the implementation of behavioral analytics. Almost every cyber-attack trails the similar basic method. This method is becoming more familiar, and defense against it is becoming more automated. By combing predictive analytics, tons of data, and artificial intelligence, cybersecurity customers are improving their ability to save themselves from hackers before it is too late.
Given the trends, investors can still expect the cyber security market to continue growing at a double-digit speed over the next few years.
Conclusion
The cyber security market is growing, but FireEye has risen at a rapid speed and it may be set for some short-term downside. Hence, I think investors should book profits and watch the stock from the sidelines for a better entry point.
