FireEye (NASDAQ:FEYE) is the poster child of the cybersecurity bubble. The stock made its market debut in September 2013 and went on to rally from its $20 IPO price to as high as $97. At the time, cyberattacks were increasing around the globe and companies were spending a lot of money to fend off attackers. As a result, FireEye stocks was an investor favorite.
That’s where it all fell apart. From March 2014 through 2016, the stock lost 90% of its value. And FEYE wasn’t alone. The entire cybersecurity sector was hit with a wave of selling following a few years of elevated optimism. The ETFMG Prime Cyber Security ETF (NYSEARCA:HACK) fell 40% from peak to trough.
But that’s where the comparisons end. Since that bottom, HACK has rallied back to a new all-time high while FireEye stock has struggled to gain any sort of momentum. The stock still sits 80% below its 2014 high as investors look to its peers as better investments.
However, I wouldn’t count FEYE out just yet. It may finally be ready to turn a corner and start catching up to the rest of the industry.
FireEye Stock Is Relying on New Products
The company is expected to turn its first annual profit this year. Estimates are for 3 cents a share, and looking ahead, Wall Street anticipates a solid increase in the bottom line in coming years.
Working in FEYE’s favor is the launch of a new Helix product, which was recently announced at a company summit. Analysts applauded the move, with both Goldman Sachs and KeyBanc boosting their price targets on the stock following the presentation. In fact, the Goldman analyst went so far as to suggest that FEYE could double if all goes well.
All that said, there are two yellow flags here that I wanted to address. The first is the stock’s lack of relative strength. This is especially concerning since the cybersecurity industry is experiencing above-average growth right now. Cyberattacks are only increasing and companies are spending more on preventative measures, so FEYE needs to figure out a way to capture this market soon.
Then there’s the issue of slow revenue growth. From 2018 to 2019, the top line for FireEye stock is expected to increase 7.1%, which isn’t exactly a high-growth number. On the other hand, ForeScout Technologies (NASDAQ:FSCT), one of my favorite small-cap cybersecurity plays, is estimated to see revenue increase 20.6% next year.
The key going forward will be the company’s new products. If FEYE is unable to make major strides, the stock will likely continue to be ignored.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.