Shares of FireEye (FEYE, Financial) have performed nicely over the last few weeks after it came to light that the company had rejected several acquisition offers. It was reported that FireEye was demanding $30 per share. The company made the right decision as the stock can move a lot higher in the long term.
Growth prospects
Cyber crimes are increasing at a rapid rate, and even major companies are also being attacked. It has become necessary for companies to seek help from cyber security firms to safeguard themselves.
At present, FireEye's Global Threat Management Platform accounts for one of the most significant and advanced cyber security platforms in the industry. With time, cyber security threats are increasing in intricacy and complexity; the company’s extremely inclusive platform will possibly distinguish it in the long run.
Moreover, the company carries on making prominent improvements to its platform in several extents like security adaptation, threat analytics, as well as progressive network security.
On the other hand, FireEye’s continuously developing cyber security platform displays the overall movements of the industry. The company presently has around 4,700 clients worldwide and should be able to attract more customers by proposing an extremely comprehensive cyber security platform.
As a matter of fact, the overall growth has decelerated compared to prior quarters, but FireEye is still emerging at a rapid pace based on industry standards. It is certain that cyber threats will surge over time, and demand for the company’s products should grow.
Cyber security market has not peaked yet
Cyber security services are essential for huge business organizations. According to a report from MarketsandMarkets, the worldwide cyber security market will reach around $170.21 billion in the upcoming five years.
The above figure shows the surge of $70 billion compared to the existing cyber security market worth $100 billion. This clearly signifies a great opportunity for cyber security firms. However, FireEye is not alone in the industry, and faces a tough competition from other major players such as Palo Alto Networks (PANW, Financial). Still, the company has some service model, such as FireEye as a Service, that differentiates it from other players and will help the company move forward.
Conclusion
All in all, FireEye still has a lot of growth potential if the company delivers on its promises. The company made the right decision by not selling the stock and holding out for a $30 per share offer. FireEye is still a takeover candidate, and investors can expect higher bids in the future, making the stock a good speculative play.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
Start a free seven-day trial of Premium Membership to GuruFocus.
