Is FireEye a Good Turnaround Play?

The cybersecurity company reported strong 4th-quarter results

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Feb 22, 2018
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After three years of dreadful decline, FireEye Inc. (

FEYE, Financial) finally managed to end 2017 in the green. The stock was up almost 20% last year.

In addition, the stock is off to a healthy start heading into 2018 as it is up nearly 16% year to date.

Shares of FireEye rose almost 10% after the cybersecurity company reported better-than-expected fourth-quarter results on Feb 8. For the quarter, the company posted earnings per share of one cent, beating the consensus estimate by two cents.The company also achieved profitability for the first time.

It also delivered record revenue of $202.3 million, again surpassing the consensus by $8.7 million. Moreover, revenue grew 10% year over year.

FireEye recently launched its new cloud-based platform, Helix, which significantly improves customer’s resiliency to attacks. At the time of a cyber attack, Helix alerts the user by displaying the nature of the threat and includes the attacker’s hacking tools, identity as well as techniques. The company is working hard to enhance Helix’s services further. 

The company said Helix was one of the significant revenue contributors in the prior quarter. As such, it looks promising as it has gained a lot of attention in such a short period of time.

In January, FireEye acquired X15 software and its advanced big data platform. The acquisition will add substantial data management capabilities to FireEye’s platform, which will help it to integrate new technologies to adapt to the evolving threat environment.

For the first fiscal quarter, the company expects revenue in the range of $192 million to $197 million, compared to estimates of $187 million. It anticipates an adjusted net loss of three cents to six cents per share, compared to the consensus of five cents.

Recently, investment firm Susquehanna upgraded its rating for FireEye from neutral to buy, with a price target of $20 per share. Analyst Anne Meisner said the company’s fundamentals are improving and its new products are helping the business to grow well. Oppenheimer also upgraded its rating for FireEye from $18 to $20 per share.

Summing up

The number of cyber attacks has grown significantly over the past several years, so it is not surprising that spending on cybersecurity continues to accelerate along with it.

FireEye appears to be a great turnaround play as the company is increasingly gaining momentum due to its cloud offerings. It is also aggressively focusing on strengthening its subscription services, which will undoubtedly increase its recurring revenue. The company seems to be in a great position to sustain growth in the future.

As the stock had a fiery jump after reporting strong fourth-quarter results, I would recommend investors wait for a dip before initiating a position.

Disclosure: No positions in the stocks mentioned in this article.

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