FireEye Investors Distracted By CFO Departure Despite Earnings Beat
FireEye Inc (NASDAQ: FEYE) is taking some heat after the firm announced that its CFO, Michael Sheridan, is leaving for a job at a private tech company.
The announcement seems to have overshadowed FireEye's Q2 earnings beat of ($0.41) versus the Street estimate of ($0.48). Sales came in at $147.2 -- slightly higher than the Street's estimate of $143.12 million.
"That's a good thing," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "If you know the SaaS model -- if you're a young company, that's basically the model. CRM used to look like that."
Udall said that all Software as a Service companies go through the same thing.
"The first thing that happens is you start becoming cash flow breakeven, then you start becoming cash flow positive," Udall added. "And FireEye, at this point, is cash flow positive. And then a period time after that you become net income break-even, then net income positive. That's really more of a Software as a Service model and the fact that the company grows very quickly and hires a lot of people does a lot of R&D."
Udall said that was not a deficiency to FireEye or any other young software company. He said they all go through the same thing, but thought the company had "strong billing" and revenue numbers regardless.
"[I] dug into it and the FY Billings Guide has been raised," Udall added. Even so, shares of FireEye have taken a hit in after hours trading. As of 5:50 p.m. EST, the company was down more than 7 percent.
"So this is all CFO BS!" Udall said of the decline. "If you ask me, I think without the CFO transition, I think the stock would be up."
Udall said it is very common for stocks to decline after a CFO announces his or her plans to exit, regardless of the reason.
Global Equities Research analyst Trip Chowdhry said there is 'misappropriated enthusiasm' for FireEye. He said there is always a new kid in town with no finish line in sight, and that FireEye is one of them. He also said the stock is "fully valued" at $43 or $44 and criticized its business model.
"Do you think your home is fully secure? No," Chowdhry told Benzinga. "I can go throw a stone in your window. But why don't I do it? Because of the police and fear I'll be incarcerated. That's the only solution. You don't need a technology solution [to stop hacking] -- you need a policy and administrative solution. The punishment is the same as someone who enters the home."
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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