FireEye Inc (FEYE) has performed well after its precipitous post-earnings decline, up over 25% from its low of $12.38 in mid-May. Part of the surge was due to recent headlines regarding a security breach at Siemens AG (ADR) (SIEGY), but I think there’s more to this stock than media buzz that leaves room for upside.
FEYE soared over 7% in one morning after discovering malware that targets industrial control systems by affecting simulated environments of German industrial giant Siemens.
It’s believed that the malware was not advanced enough to attack live systems, but it does show how hackers can potentially invade systems beyond IT environments.
FEYE Is Here to Stay
This is exactly why enterprises need to be prepared to meet advanced cyberattacks and demonstrates the importance of FEYE’s products, which offer protection and security in the nebulous space of the cloud.
Nearly all consumer applications today are delivered as cloud services: For example, the email you access on your PC is not on the PC itself, but exists on the internet and is available for download when you request it.
The amount of data in the cloud can be greater than what a typical data center network can hold, creating the need to rebuild networks for more storage.
These cloud networks must deliver high capacity, high availability and predictable performance to meet demand, and also need to be programmable to allow integration with third-party virtualization (for example, using Firefox instead of Internet Explorer on a Microsoft Corporation (MSFT) computer).
More importantly, though, cloud networks need to be secure. With so much sensitive information stored in virtual environments, keeping it safe from hackers, distributed denial-of-service attacks, malware and the like is absolutely paramount.
FEYE saw a similar surge in November 2013, when FEYE alerted Target Corporation (TGT) to an advanced persistent threat on its network. Services like FEYE’s will only ramp up in demand as we push more information into the cloud and companies realize the necessity of proper protection.
Consulting firm Computer Economics found that a net 17% of the organizations it surveyed plan to increase their expenditures for networking infrastructure in 2016. And Cisco Systems, Inc. (CSCO) estimates that there will be 5.5 billion wireless networks by 2020, up from 4.6 billion today. It also sees mobile traffic increasing from 44 exabytes in 2015 to 367 exabytes by 2020, an increase that is more than 8X greater than the 2015 number.
That’s a rapidly expanding, addressable market, which means there’s still plenty of headroom for FEYE to move higher from here.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.