Rejecting acquisition offers was probably the worst thing that happened to FireEye (FEYE, Financial) investors. Last year, it was reported that the company had several buyout offers, but none materialized due to the fact that the company’s management was holding out for a $30 per share offer.
Fast forward a couple of months. FireEye is now struggling with several of its executives having jumped the sinking ship.
Despite the strong growth of the cybersecurity industry, FireEye has failed to benefit from the trend, and its business is in very bad shape. The company reported its quarterly earnings Friday, and shares tanked further 18% due to the abysmal numbers.
The company reported fourth-quarter EPS of -3 cents, beating the analysts’ estimates by 13 cents. Despite the hefty earnings beat, shares tanked as the company’s growth stalled. FireEye’s top line was stagnant compared to the year-ago period as the company reported sales of $184.7 million, missing the analysts’ estimates by $6.29 million.
In addition to the weak sales, the company’s billings, gross margin and cash flow from operation shrunk on a year-over-year basis. The guidance was probably the worst part of the company’s results. FireEye now expects revenue of $160 million to $166 million for the upcoming quarter, way below the consensus of $176.61 million.
With the company operating in a highly competitive and growing industry, it seems like the stock is a deadbeat investment despite the massive plunge. FireEye has failed to grow in a growing industry whereas its peers have prospered at the same time. As a result, investors should remain cautious about investing in FireEye going forward.
Moreover, it doesn’t look like the company will be an acquisition target anymore. Due to the management’s terrible performance, FireEye’s days of growth are over, and no company would be willing to pay a premium at current levels. Not to mention, despite cutting costs, FireEye is still reporting huge losses, which points to a flaw in the company’s business model.
Conclusion
The latest quarterly results just show that FireEye is a dead investment. While traders can still profit from the stock over the short term, long-term investors should stay as far away from the stock as possible. Due to the company’s nonexistent growth and its inability to turn a profit, FireEye is a strong sell.
Disclosure: No position.
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