Piper Jaffray Upgrades FireEye As 'Path To Profitability Becoming Clearer'

Piper Jaffray’s Andrew J. Nowinski upgraded the rating for FireEye Inc FEYE from Neutral to Overweight, while raising the price target from $15 to $24.

Analyst Andrew Nowinski mentioned four reasons for the upgrade:

"As-a-Service" Model

FireEye is likely to successfully transition to an “As-a-Service” model. This would ultimately result in increasing the company’s recurring revenue to 75 percent of total revenue by 2020. “We believe FireEye is well-positioned to execute this transition, due to the company’s best-in-class intelligence gathering capabilities,” Nowinski wrote.

International Expansion Without Significant Increase in Costs

The company is expected to effectively leverage the channel to achieve international expansion, without significantly increasing its operating expenses. International regions contributed around 30 percent of total revenue in FY15. Management expects this to increase close to 50 percent.

Product Roadmap Expands TAM

FireEye has a strong product roadmap, with which it can penetrate new markets, like the SMB market and the public cloud. “We believe this will enable FireEye to provide enterprise-grade technology to the SMB sector, but could also lead to more lucrative add-on sales afterward,” Nowinski said.

More Visibility into Profitability

These factors would enable the company to become profitable in 2H17. “We believe FireEye has the right growth drivers and cost controls in place to achieve this,” the analyst commented.