1 Little-Known Metric Detwiler Is Watching When FireEye Reports

FireEye Inc FEYE is scheduled to report its third-quarter financial results after the market closes on Wednesday.

Although the Street is expecting to see a year-over-year amelioration in earnings, expectations are not especially high.

In a report issued Monday, Detwiler Fenton shared some comments regarding the negative chatter heard on the Street ahead of the earnings call.

Shares of FireEye have lost almost 40 percent of their value over the past three months and, according to Detwiler’s Paul Rodriguez, this pressure could be attributed to several factors, including: “pressure on the IT security sector itself given apprehension over the sustainability of growth in the space in 2016 [and] some negative sell-side chatter around FEYE on concerns over competition which continues to weigh on pricing.”

Moreover, the expert noted, Symantec Corporation SYMC’s recent entry into the cybersecurity field increases competitive pressures.

Detwiler’s Take

As per the research note, Detwiler assured investors FireEye “has been responding tactically to current market conditions emphasizing their cloud delivery model along with a range of service offerings.”

Rodriguez added that some relationships (like those with the insurance industry) have the potential to be lucrative too, but investors are not talking about them enough.

Related Link: Wedbush Downgrades FireEye, Says New Checks Make Them More "Cautious"
Furthermore, the firm expects service offerings to once again be a strong contributor to the quarter, the note continued. “While the channel is well versed on the benefit of the Mandiant offerings we are aware of other commentary concerning channel conflicts. Nevertheless, Mandiant remains an important door opener for FEYE and possesses competitive differentiation in the field.”
Cloud delivery should prove to have even larger importance to the company, especially given the success it is said to have been having with its e-mail (ETP) solution.

All Eyes On FireEye’s ‘Suite’

“We are particularly interested in trends on product revenue performance and believe investors should be closely monitoring this metric to gauge the impact FEYE is having with their ‘suite’ message,” Rodriguez concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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