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Juhi Kulkarni
Juhi Kulkarni
Articles (282) 

Should You Consider FireEye After Post-Earnings Selloff?

Stock looks cheap despite lack of profitability and bad quarter

May 20, 2016 | About:

FireEye (NASDAQ:FEYE) has pulled back massively over the last few months, and the company’s recent earnings release didn’t help its cause, either.

FireEye’s earnings pushed back all the stocks in the cyber security sector. Investors with an appetite for risk can consider FireEye as a speculative investment after the pullback.

Growing demand for FaaS

The use of more cyber security solutions may keep the firm safer, but it becomes complex and difficult to manage. Solutions differ, but products habitually work by conveying warnings to the security departments of consumers, which are then encumbered with striding via noise and guiding which threats need to be tackled.

Target (NYSE:TGT) was attacked two years before in which it mislaid the credit card data of millions of customers. Unluckily, FireEye was one of Target’s vendors, and the company magnificently warned Target before the attack, but Target’s security members disregarded the notice.

Therefore to overcome this issue, the company now sells itself as a service titled FireEye as a Service. FaaS is composed of its own group of security specialists who investigate security warnings so consumers do not have to worry much about the warnings.

Demand for FireEye’s innovative service grew at a rapid rate soon after the company launched it in 2014. FaaS surpassed $100 million in sales in the first 18 months of its launch. It also proposes greater margins than the company’s other products and permits it to appeal to consumers more swiftly.

Strong growth

In the most recent quarter, FireEye’s top line came in at $168 million, $4 million less than the analyst estimates of $172 million. Throughout the past two years, FireEye’s sales have escalated decently and had almost doubled compared to the first quarter of 2014.

On the other hand, the company produced $74 million of revenue and $99 million of billings on a non-GAAP basis, and both the numbers endured to deliver robust growth, a surge of 34% and 23%, on a yearly basis.

The company makes use of a metric called platform revenue, which provides the amount of top line produced from appliance and subscription sales. Throughout the past two years, appliances as a percentage of overall platform top line have dropped, from 52% in the first quarter of 2014 to 31% in the most recent quarter.


Cyber security stocks have been pretty volatile, but after the recent pullback FireEye looks a very good speculative play. The cyber security industry is still growing rapidly, and the recent earnings miss should just be a one-off thing.

Rating: 4.0/5 (1 vote)



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