Goldman Downgrades FireEye To Sell; 'Fundamentals Likely Remain Challenged Through 2017'

FireEye Inc FEYE is going through several meaningful business model and product transitions, which Goldman Sachs’ Gabriela Borges believes could create medium-term risk to the stock and expectations.

Borges downgraded the rating on the company from Neutral to Sell, while lowering the price target from $15 to $11.

Medium-Term Risks

The analyst believes there could be 21 percent downside risk to the stock valuation.

Although a large part of the risk facing the company already appears priced in, Borges believes “the Street continues to underestimate the challenges associated with transitioning from high-end hardware-based security products to a broader subscription/services portfolio in an environment where competition is high.”

Fundamentals Pressured

FireEye is in the midst of taking meaningful steps to position products and optimize costs in order to improve the company’s long-term growth prospects, led by new CEO Kevin Mandia and chief financial officer Mike Berry.

However, Borges expects the company’s fundamentals to remain pressured in 2017, due to changes in customer buying patterns, and believes that “FireEye’s strategy to move into the mid-market will be difficult to execute.”

“FireEye is in the process of releasing next-gen products, sales cycles typically take 6–9 months, and it may be difficult to intercept customer budgeting cycles mid-year,” the analyst pointed out.

At last check, FireEye was down 6.13 percent at $13.02.