FireEye Inc (FEYE) Stock Surges After Another Secure Quarter

FEYE stock - FireEye Inc (FEYE) Stock Surges After Another Secure Quarter

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FireEye Inc (NASDAQ:FEYE) CEO Kevin Mandia continues to enjoy satisfying results from his turnaround strategy, as evidenced by Tuesday evening’s second-quarter earnings report. FireEye was able to beat the Wall Street consensus, and as a result, FEYE stock is up 5% in after-hours trading.

FireEye Inc (FEYE) Stock Surges After Another Secure Quarter

FireEye reported a 6% improvement in second-quarter revenues to $185.5 million, which was more than the analyst community was looking for, with projections of $176.4 million. Moreover, the company’s adjusted net loss came to just 4 cents per share — a third of the 12-cent puddle of red ink Wall Street’s pros expected.

FEYE stock also was responding positively to solid full-year guidance. The cybersecurity firm now projects that revenues will range from $734 million to $746 million. This compares to the prior guidance of $724 million to $736 million.

Other highlights of the quarter:

  • The company announced that its cloud-based FireEye Government Email Threat Prevention Service received certification from the U.S. Department of the Interior (DOI).
  • FireEye added various new form factors to its Endpoint Security solution, such as Linux support, antivirus replacement and remediation and Artificial Intelligence (AI) features.
  • For the year, FEYE has reduced its operating losses by more than $100 million.
  • The non-GAAP gross margins were 74% in Q2, compared to the guidance of 72%.

Also encouraging is that FireEye’s Street-pleasing report came amid lackluster Q2 results for the rest of the industry.

Top cybersecurity operators including Check Point Software Technologies Ltd. (NASDAQ:CHKP), Barracuda Networks Inc (NYSE:CUDA), F5 Networks, Inc. (NASDAQ:FFIV) and Fortinet Inc (NASDAQ:FTNT) all found ways of disappointing the Street over the past quarter.

FEYE stock chart

On the technical front, Tuesday night’s rebound has FEYE stock re-challenging the 50-day moving average, which shares just crossed below a few days ago. FireEye had been testing the average as support a few times over the past month before finally breaking through.

Shares broadly have been trading in a tight range between $16 and $14.50 since May. Thus, investors who are hoping this is the start of another breakout will need more confirmation buying in the coming days.

What This Means for FEYE Stock

Now the Q2 performance is no fluke. Keep in mind that the prior quarter also showed considerable progress. In other words, it looks like the turnaround is the real deal — not just a temporary blip.

This is certainly remarkable since the cybersecurity industry is intensely competitive. And yes, FEYE did lose credibility in the marketplace.

Yet Mandia has demonstrated his leadership skills — and quickly. He did not waste time in cutting costs. At the same time, he retooled the product line on the massive cloud opportunity. A key part of this is the Helix platform, which has become an instant hit.

If anything, FEYE may soon return to its glory days of growth. For example, the company is showing nice gains with billings, which are harbinger of future revenues. Billings in Q2 came to $172 million, which compares to the Street forecast of $167.7 million. As for the current quarter, FEYE is expecting these to range from $190 million to $205 million.

Now there are still risk factors, of course. Note that one of FEYE’s researchers was the victim of a hack! And while there are no signs that the company’s systems were compromised, it does raise questions about internal procedures.

Another issue is that the enterprise market can be subject to lots of choppiness. Given the hefty price tags of this kind of software, it is common for there to be delays. This actually explains some of the weakness in the cybersecurity category.

But so far, Mandia has shown that he knows how to navigate the challenges – and most importantly, find ways to capitalize on the growth opportunities. As’s Richard Saintvilus has noted recently:

“Investors who are looking for a small-cap growth tech stock operating in two vibrant markets — namely data security and cloud computing — should want to own FEYE stock …”

Tom Taulli runs the InvestorPlace blog IPO Playbook and operates, which provides year-round tax services. Follow 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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