Is 2017 Finally the Year FireEye Inc (FEYE) Stock Backs up the Hype?

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Straight off the bat, I’ll state that I’m a supporter of FireEye Inc (NASDAQ:FEYE). In my opinion, it has a strong business, very competent leadership, and best of all — location, location, location! Investors have considerable difficulty buying into a great company in a less than stellar industry. FEYE stock, on the other hand, is a direct play on cybersecurity. That’s somewhat of an important issue, you might say.

Is 2017 Finally the Year FireEye Inc (FEYE) Stock Backs up the Hype?

On the surface level, FireEye stock has all the right components of a proper investment.

But InvestorPlace contributor Dana Blankenhorn is spot on when he states that FEYE “lives on the bleeding edge of computer security. It should be a great place for FEYE stock to live, but that’s only true if what it can deliver what the market wants.” So far, the markets have voted with their wallets, and the overall picture is hardly inspiring.

The Mountain of Challenges for FEYE stock

We have to consider that FEYE stock was once threatening to carry a triple-digit price tag. Now, FireEye stock can be acquired for less than a prime-time movie ticket. Furthermore, Mr. Blankenhorn points out that what “customers prefer are the solutions of Palo Alto Networks Inc (NYSE:PANW), which focuses on security as a service, built around its own firewalls, the Wildfire Threat Intelligence cloud and an endpoint protection system called Traps.”

Even there, neither PANW nor FEYE are in the clear. Blankenhorn states that the 90-9-1 rule — essentially, that the market leader takes most of the spoils, and the rest are fighting for survival — will always pressure any competitor in cybersecurity. Currently, Palo Alto has better intelligence in their products, which is a plus against FireEye stock. However, cyber attacks are never repetitive. The question of which company provides a better security platform can, and will, change rapidly.

That issue brings the competitive environment of FEYE stock into focus. As InvestorPlace writer Tom Taulli bluntly states, competition is “intense for the cybersecurity market.” Some of the top names fighting for the scraps are Fortinet Inc (NASDAQ:FTNT), Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Proofpoint Inc (NASDAQ:PFPT). Taulli further notes that some “mega tech companies have also moved aggressively into the space, such as Cisco Systems, Inc. (NASDAQ:CSCO). But perhaps the biggest threat is from the startups, which have the benefit of a flush venture capital market.”

The bottom line here is that any screw up or any missed opportunity can set a player back years. In cybersecurity world, that’s a lifetime. Symantec Corporation (NASDAQ:SYMC) offers a cautionary tale of what can happen when complacency overrides adjusting to consumer trends. Certainly, it’s not an enviable position to be in.

The Bullish Argument for FEYE

So is there any light at the end of the tunnel? I believe that there is. The other three-word mantra of what makes a good business is “people, people, people.” And guess what? FEYE has some of the best people in this rough and tumble sector.

At the top of the foodchain is CEO Kevin Mandia, a renowned name within the industry. His career began as a security officer in the United States Air Force, and later as a cybercrime investigator in the Air Force Office of Special Investigation.

Taulli gave a resounding endorsement of his qualifications when he wrote that “Mandia has a rare blend of deep experience with the technical aspects of cybersecurity and also how to build successful companies. So regarding the product line, a key part of his strategy is to offer more affordable solutions so as to cater to smaller customers.”

Let’s also not forget that FEYE stock is backed by still-robust fundamentals. It has impressive reach with its service and product lineup. According to its latest quarterly earnings report, the company tacked on 287 new customers, 47 of which were for high-roller amounts exceeding $1 million. Revenue is also chugging along at an impressive rate despite the newness factor of FireEye stock wearing off.

A Reasonable Bet in FireEye Stock

Of course, no matter what anyone says, FEYE stock is a risky proposition.

FEYE stock, FireEye stock
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Source: Source: JYE Financial, unless otherwise indicated

These are shares that, since its first full year as a publicly traded entity, returned a pathetic average loss of 34%. Adding to the concerns, the returns progressively worsen — 2014 lost 24%, 2015 shed 33%, and last year, FEYE gave up nearly 46%.

But here’s something to chew on — the choppiness has definitely eased in the past three years. I say that because in 2014, the spread between the absolute high and low of the year was 292%. The following year, the margin was 180%. Last year, it was just under 107%.

For some, that’s still too wild. However, the math is clear. FireEye stock is definitely stabilizing.

On a qualitative basis, I think this is an exciting juncture for the company. They might be in a tussle with Palo Alto and other competitors, but who isn’t fighting? There’s never going to be a perfect situation. That said, as a contrarian opportunity, I think it’d be remiss not to consider FEYE stock. It’s in the right industry with the right people — all they need is the right opportunity.

That’s a bet I think most people are willing to take.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/2017-finally-year-fireeye-inc-feye-stock-backs-hype/.

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