Cybersecurity specialist like FireEye Inc (NASDAQ:FEYE) has grown in popularity over the past several weeks, sending FEYE stock soaring nearly 20% in thirty days.
The reason for the surge in FireEye? Recent concerns about the WannaCry ransomware and other cyber threats have caused companies and governments worldwide to rethink their threat-prevention strategies. This concern has sent the PureFunds ISE Cyber Security ETF (NYSEARCA:HACK) to 52-week highs.
Competitors within the space such as Barracuda Networks Inc (NYSE:CUDA), Fortinet Inc (NASDAQ:FTNT), Symantec Corporation (NASDAQ:SYMC), Cisco Systems, Inc. (NASDAQ:CSCO) and Palo Alto Networks Inc (NYSE:PANW) have also seen increased buying interest.
But don’t even think about taking your FEYE stock profits yet. Despite its year-to-date gains of 25%, the company remains a cyber-prevention gem that could reach $20 per share by the end of the year. This means FireEye stock can deliver roughly 33% additional returns from Wednesday’s closing price of $15.06.
Reasons to Like FEYE Stock
After losing 41% of its value in 2016, FireEye’s cost-cutting efforts continue to have a meaningful impact on its bottom line. For 2017, its adjusted loss is projected to narrow from 99 cents per share to 30 cents. For this reason, among others, I told you FEYE would deliver 35% on its way to $17 per share; I said this all the way back in January. Since that article, the stock has risen roughly 30% from $12.60 to a high of $16.25 on May 15. And with the company banking on new product launches to grow the top line, I’m upping my price target to $20.
In the most-recent quarter, FireEye posted first-quarter revenues of $173.7 million; it not only registered a year-over-year increase of 3.4%, but it also came ahead of the Wall Street consensus estimate of $164 million and topped its own revenue forecast of $160 to $166 million. FEYE continues to transition its business to subscription and cloud-based service from its traditional hardware offerings.
In that regard, the fact that Subscription and Services revenues rose 11.7% to approximately $150 million was encouraging in the sense that it offset the a almost 30% decline in Product revenues, which came to $23.7 million. And while the company’s billings declined 18% to $152.4 million, it was nonetheless well above management’s guidance of $130 to $150 million. The loss was mainly attributed to the business adjustments, particularly the cloud/service transition the company has undertaken.
On an operation basis, FireEye’s adjusted operating loss of $56.9 million was 58.5% narrower than the year-ago loss of $137.2 million. Another encouraging sign was the fact that its non-GAAP operating margin improved to a drop of only 7% versus 44% a year ago. Management’s focus on increased operational efficiency and sales productivity, lead to a $60 million improvement, and continues to pay huge dividends. Until there are signs of erosion, FEYE stock will continue to pay investors too.
The Bottom Line on FireEye Stock
Given the ever-connected world we live in, cybersecurity will remain an increasingly important part of peoples lives and the health of businesses, especially as corporations transition more towards mobile platforms and the cloud. And with FireEye issuing a strong outlook for the second quarter and full-year 2017, FEYE stock should be owned, not traded until it reaches $20 per share.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
