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Citi Upgrades FireEye To Buy, New Survey Suggests Huge 2016 Upside

Citi Upgrades FireEye To Buy, New Survey Suggests Huge 2016 Upside
FireEye to Announce Q4, FY 2013 Results on February 11, 2014, After the Market Close
  • Shares of FireEye Inc (NASDAQ: FEYE) are down 36 percent year-to-date and trading close to their 52-week low of $19.76.
  • Citi’s Walter H. Pritchard upgraded the rating on the company from Neutral to Buy, while raising the price target from $31 to $35.
  • FireEye is expected to benefit from increased security spending, especially network spending, Pritchard stated.

A recent survey of Chief Information Security Officers by Citi indicated an acceleration in security spend in 2016, with network security leading the way. The survey also showed that security spending was expected to increase from about 5 percent in 2015 to 8 percent in 2016.

“Network spend should again outpace end-point spend while software and personnel spend outgrow hardware,” analyst Walter Pritchard said. He added that FireEye showed exceptional strength in the survey.

Pritchard mentioned that FireEye had the strongest spending intentions of all emerging challenger vendors with “leading write-in mentions in both network and next-gen endpoint.” The analyst also noted that less pressure to consolidate spend with fewer vendors in network and end-point security will have a positive impact on the company.

While consolidation of purchasing of APT solutions towards firewall and incumbent endpoint platforms has been a concern area, the survey showed continued reversal of the consolidation pressure in network security and also buyer support for APT solutions individually. Pritchard added that both these trends are expected to have a positive impact on FireEye.

“While we don’t directly correlate survey data to any one quarter, this data further convinces us FEYE had more of an execution issue in Q3 than a change in demand / secular market shift,” the Citi report stated. FireEye is likely to report FY16 billings growth of 28 percent, in-line with its 3Q15 levels when it faced tough comps.

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