Stay On The Sidelines Following FireEye Miss

FireEye Inc FEYE reported Q4 2016 revenue and billings below the consensus and the estimates, “with better bottom-line performance driven by one-time benefit of $15 mn and lower commissions,” Imperial Capital’s Michael Kim said in a note.

The analyst maintained an In-Line rating on the company, while lowering the price target from $15 to $12.

Q4 Miss

Kim mentioned that the quarter was impacted by contract delays, leadership transitions and lower sales capacity.

The analyst believes FireEye’s Q1 guidance suggests persisting headwinds, especially due to more rapid declines in appliance sales.

“We look for strong turnaround progress and improved sales execution on the company’s new cloud-based solutions and Helix platform, as well as greater channel leverage under new sales leadership,” Kim stated.

On The Sidelines

The analyst recommended investors stay on the sidelines until management is able to deliver consistent financial results and revive billings growth, while continuing to be on track to achieving sustained profitability.

However, Kim expects minimal disruption due to the departure of CFO Mike Berry, following the appointment Frank Verdecanna, SVP of finance and chief accounting officer, as Berry’s successor, given Verdecanna’s “extensive familiarity with the company.”

Estimate Lowered

The FY2017 billings estimate has been lowered 7 percent to reflect declines during the first half of 17 and improved performance in Q4 2017 due to the new cloud-based solutions and more robust sales execution under new leadership.