FireEye, Inc (NASDAQ:FEYE) has soared almost 8% on Thursday, reaching a session high of $15.53 on more than 40% of its normal trading volume.
But what’s suddenly changed to get FEYE off its butt? Revenue has been hard to come by for the Milpitas, Calif.-based cybersecurity specialist, which has missed Wall Street’s revenue estimates in four straight quarters. Did something change to suddenly alter that outlook?
The company has software that detects cyber threats, protecting corporations with intrusion intelligence and other services. It’s also a crowded market, however. Despite Thursday’s rise in FEYE stock, shares are down more than 26% year-to-date, while plunging almost 60% over the past year. And if you’ve held FireEye since its IPO in 2013, you’re in the hole almost 60%.
While revenue and profits have been far and few, speculation about a possible takeover has run rampant. And it would seem that’s what’s causing Thursday’s spike.
But that’s nothing new.
Companies like Cisco Systems, Inc. (NASDAQ:CSCO) and Fortinet Inc. (NASDAQ:FTNT) continue to be mentioned as possible suitors. Both companies can capitalize on technologies FireEye owns. But the fact that a deal, which has been rumored for two years, hasn’t happened yet suggest they might not be interested.
Beyond Cisco, there’s the industry leaders like Palo Alto Networks, Inc. (NYSE:PANW), which continue to grow market share at the expense of FireEye and hurting FEYE stock. That said, Cisco has enough financial muscle to make a deal happen. The questions remains: Should it bite? True, security has become one of Cisco’s priorities.
But FireEye stock is not a bargain. And that’s even with the punishment the stock has taken.
FireEye is projected to lose $1.30 per share in the current fiscal year and lose another 56 cents next year. In other words, CSCO would have a tough time justifying buying FireEye to its shareholders.
And with a forward price-to-earnings ratio in negative territory for the next two years, it’s tough to justify the recent spike in FEYE stock.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
