FireEye, Inc. (FEYE) Buy or Sell Stock Guide

Last updated: Sep 12, '19

Are you looking for the analysis of FireEye, Inc. (FEYE) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 13 reasons to buy and 6 reasons to sell FEYE stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about FEYE stock:

  • Is FEYE a buy or a sell?
  • Should I sell or hold FEYE stock today?
  • Is FEYE a good buy / investment?
  • What are FEYE analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy FEYE stock:

1. The financial well being, brands and reputation of enterprises are always exposed to sophisticated cyber threats. Consequently, cyber security has become a mission- critical, high-profile requirement. According to a Markets and Markets report, worldwide cyber security spending will reach $101 billion in 2018 and $170 billion by 2020.

2. Exponential growth in the amount of data, complexity of data formats and the need to boost resources at regular intervals has led to a surge in demand for cloud computing software and applications. This trend has made it necessary for companies to enforce stricter data security measures. Given the industry’s trends, FireEye is currently focusing on cloud-based protection services.

3. FireEye is currently focused on selling more subscription-based services. This business model generates recurring revenue that leads to stable revenues. Moreover, it is more futuristic as companies increasingly move to the cloud, where the as-a-service model is common.

4. Despite of witnessing significant year-over-year top-line growth, FireEye has failed to impress investors with bottom-line results. Since it went public in September 2013, the company has not been able to report profits for even a single quarter. Therefore, since the beginning of first-quarter 2016, the company has been taking rigorous cost optimization initiatives, which include additional facilities closures, headcount reductions and minimization of discretionary spending.

5. FireEye pursues strategic acquisitions to drive growth. Most recently in January 2018, the company announced the acquisition of X15 Software with an aim to incorporate the latter’s Big Data platform to its security solutions against cyber attacks. X15 Software’s Big Data platform assists in collecting, retrieving and analyzing huge volumes of machine generated data in a scalable fashion in real time, per the press release. Hence, the buyout is anticipated to enhance FireEye’s abilities of managing security related data for better decision making, thereby helping its clients to counter the risks against them more effectively.

6. We consider that the January 2016 iSIGHT Partners buyout will prove to be a game changer for FireEye in the long run. The deal has beefed up FireEye’s cyber security suite and enhanced its competitive dynamics. iSIGHT Partners invested nearly $100 million over the last eight years to build its cyber intelligence capability which can identify the source of the threat. Post the acquisition, iSIGHT Partners will complement FireEye’s Mandiant business, acquired in late 2013.

7. FireEye is gaining customer accounts and increasing penetration of existing customers, which is driving revenue growth. During 2017, the company added 990 customers, bringing the total count to over 6,600 in 67 countries. It should be noted that in each of the last nine quarters, FireEye has added at least 200 customers.

8. FEYE quarterly revenue growth was 7.40%, higher than the industry and sector average revenue growth (5.27% and 5.06%, respectively). See FEYE revenue growth chart.

9. FEYE profitability is improving. The YoY profit margin change was 26.80 percentage points. See FEYE profitability chart.

10. FEYE Price/Book ratio is 3.89, and it’s low compared to its industry peers’ P/B ratios. See FEYE forward Price/Book ratio chart.

11. FEYE Price/Sales ratio is 3.28, and it’s low compared to its industry peers’ P/S ratios. See FEYE forward Price/Sales ratio chart.

12. FEYE average analyst rating is Buy. See FEYE analyst rating chart.

13. FEYE average analyst price target ($17.87) is above its current price ($14.03). See FEYE price target chart.

Now that you understand the bull case, let’s look at the reasons to sell FEYE stock (i.e., the bear case):

1. Shorter-length contracts remain a major concern for FireEye’s near-term top-line growth. It should be noted that the average contract length has declined to 24 months in fourth-quarter 2017 from over 36 months in 2016. Although there is an advantage to the shorter-length contracts as these generally generate higher margins compared with three-year contracts, however, these adversely impact near-term top-line performances.

2. FireEye faces stiff competition from several big and small players in the security application market. Further, over the past few years, demand for IT security has been on the rise driven by increasing awareness and cyber attacks, making the market more attractive for new players. Also, there are some established players in adjacent markets like Cisco and Juniper that can cross-sell security products and include security into their existing product lines, further intensifying competition in the space.

3. FEYE forward P/E ratio is 74.61, and it’s high compared to its industry peers’ P/E ratios. See FEYE forward P/E ratio chart.

4. FEYE PEG ratio (P/E adjusted for growth) is 9.10, and it’s high compared to its industry peers’ PEG ratios. See FEYE PEG chart.

5. FEYE short share of float is 9.03%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock. See FEYE short share of float chart.

6. FEYE short interest (days to cover the shorts) ratio is 4.13. The stock garners more short interest than the average industry, sector or S&P 500 stock. See FEYE short interest ratio chart.

Now let's look at the key statistics for FEYE:

Metrics FEYE
Price $14.06
Average Price Target / Upside $17.87 / 27.05%
Average Analyst Rating Buy
Industry Software - Application
Sector Technology
Number of Employees 3,200
Market Cap $2.99B
Forward P/E Ratio 81.94
Price/Book Ratio 3.49
PEG 19.52
Revenue (TTM) $857.34M
YoY Quarterly Revenue Growth 7.4%
Profit Margin -28.13%

What are your thoughts on FEYE?

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