FireEye Inc (FEYE) Stock Can Blaze Up Again

When it comes to FireEye Inc (NASDAQ:FEYE), Wall Street does not have much confidence left. And the company’s chart tells the grim story. Since early 2014, FEYE stock has plunged from $85 to $11.21.

FireEye Inc (FEYE) Stock Can Blaze Up Again

But for gutsy investors — those who have a strong stomach — might there be an opportunity here? Is FEYE stock worth the risk?

Well, I think so. But this is not to diminish the real issues with FireEye stock. Just take a look at the latest earnings report. The revenues were flat and billings dropped by a grueling 14%. FEYE also put out lackluster guidance for Q1. As a result, FEYE stock dropped more than 10% on the news.

So how did the company get to this point?

Well, first of all, FireEye was late in making the transition to the cloud. This happened even though many other tech companies have been making the move to this type technology over the years.

What’s more, FEYE has had to deal with the intense competitive environment. The space is full of top operators like Palo Alto Networks Inc (NYSE:PANW), Fortinet Inc (NASDAQ:FTNT) and Cyberark Software Ltd (NASDAQ:CYBR). But even old-line tech companies, such as Microsoft Corporation (NASDAQ:MSFT) and Cisco Systems, Inc. (NASDAQ:CSCO), have been ramping their cybersecurity efforts.

Restructuring and FEYE Stock

Despite all the problems and challenges, there are still some encouraging factors for FEYE stock. Perhaps the most notable is the CEO, Kevin Mandia. He built a premier cybersecurity firm, which he sold to FEYE in late 2013. He was also a United States Air Force Officer and served in the 7th Communications Group at the Pentagon.

Mandia has also written two books about cybersecurity.

No doubt, this is the kind of background FEYE really needs. Consider that since Mandia took the helm in May 2016 — after the former CEO abruptly stepped down — he has wasted little time in making changes, like substantial cost cuts that have led to two quarters of improved results for the bottom line.

But most importantly, Mandia has pushed hard on the move towards the cloud. And yes, there are signs of traction. During the latest quarter, FEYE had 47 customers that shelled out more than $1 million. There were also 288 new customers.

Yet restructurings are tough. For example, FireEye has had to deal with major challenges as seen with the sales force. What’s more, revamping a product line which has been mostly composed of hardware offerings and up-front licensing fees is certainly no easy feat.

Bottom Line On FEYE Stock

With the pounding of intense selling, it should be no surprise that the valuation on FEYE stock is fairly attractive. Note that the current price-to-sales ratio is only at about 2.7X. By comparison, PANW trades at 9.4X and FTNT sports a multiple of 5X.

In other words, if FireEye can reinvigorate growth, there is plenty of room on the upside.

But there is always the potential for a buyout as well. The cybersecurity space has been a hotbed of dealmaking over the past few years.

According to William Blair analyst Jonathan Ho: “The best outcome would be a sale of the business, as we believe FireEye still has solid technology, the Mandiant business, and a pipeline of new products that could appeal to the market as a security services platform.”

Hey, just this week there was a rumor that — six months ago — Symantec Corporation (NASDAQ:SYMC) held talks with FEYE for a possible sale.

Granted, buying a company solely because of making a wager on a transaction is dicey. But this outcome could just be a potential bonus. In the meantime, it is important that FEYE stock appears to be making the right moves to get things back on track. Thus, having patience could ultimately provide a nice reward for investors, especially since there are already signs of traction.

Tom Taulli runs the InvestorPlace blog IPO Playbook and also has his own free iOS app to estimate your tax refund, which is at PathwayTax.comFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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