As the old saying goes, expect it when you least expect it.
A little over a week ago, you could barely give your FireEye Inc (NASDAQ:FEYE) shares away. FEYE stock was knocking on the door of new multiyear lows — again — and questions of whether or not CEO Kevin Mandia was the best choice to remain at the helm.
What a difference a week makes. FireEye stock was upgraded not by one but by two different analysts in the meantime, and FEYE shares are up more than 20% from their mid-March lows.
Does the new-found zeal and a pair of raised opinions make FEYE stock a buy? It certainly doesn’t hurt the bullish case, but…
FireEye Turns the Corner
On the off chance you’re reading this but aren’t aware, FireEye is a peer and rival of cybersecurity names like Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Palo Alto Networks Inc (NYSE:PANW). It’s considerably smaller than both, though a known name all the same.
What has been missing from the picture more than anything else for FireEye is profits — there aren’t any. But, once the company pared back on its buying spree and started thinking seriously about turning a profit, a glimmer of hope started to shine. Specifically, last quarter’s loss was the first one anyone could recall that got smaller on a year-over-year basis.
Analysts have noticed in the meantime, and taken action.
Case in point: Last week, Goldman Sachs upgraded its stance on FEYE stock from a “sell” to a “buy,” simultaneously upping its price target on FireEye shares to $15. Goldman Analyst Gabriela Borges is particularly excited about the possibility of a buyout, and the launch of a new product/service called Helix in April.
Helix is an all-encompassing platform that allows customers to interface with everything FireEye offers. It melds threat detection, threat intelligence and automation, and operates as on-premises software or can be run virtually in the cloud.
Borges went on to say “Based on our bottom-up segment model, we expect estimates to be revised higher post a material reset over the last year.”
In other words, the market is underestimating FireEye.
It wasn’t just Goldman Sachs though. Bank of America Merrill Lynch upgraded FireEye stock just a couple of days prior, from “neutral” to “buy.” BofA says FEYE stock is worth $18 per share … the price Borges suggested as a likely acceptable buyout offer. The analyst’s note explained:
“FireEye’s core value proposition is centered around having some of the most advanced threat intelligence that lends its value to three areas of innovation: dealing with network threats, strong position in endpoint protection and above all is the value of analytics and threat management.”
The new bullish calls sound an awful lot like the themes Mandia laid out in August of last year, when the company retooled its product and revenue model. He explained then:
“We believe that by broadening our threat coverage and offering competitively priced cloud-based solutions that our products become better suited to distribution through our reseller channel. Our channel partners can play an important role in introducing our new solutions and expanding our customer base.”
The new business model wasn’t particularly well received, largely because it was accompanied by a contracted revenue outlook. As it turns out though, he was right.
Him being right hasn’t prevented some FEYE shareholders from questioning Mandia as the company’s top executive, however.
Bottom Line for FEYE Stock
Up 20% since mid-March, FireEye stock is tough to step into now, even with a couple of key upgrades in tow.
Don’t let that recent runup distract you from the fact that the company is verifiably on the right track though. While it’s still a trade more than an investment, any decent lull is also a decent buying opportunity now that profitability is in sight and an acquisition may be in the cards.
The U.S. cybersecurity market, expected to be worth $18 billion this year — and worth $135 billion on a global basis — certainly isn’t going to stop growing anytime soon.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.