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Should FireEye Investors Buy The Dip?

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Should FireEye Investors Buy The Dip?
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Cybersecurity company FireEye Inc (NASDAQ: FEYE) reported fourth-quarter results that came in better than expected but management's cautious outlook prompted a sell-off in the stock. Shares were trading lower by 12 percent at $16.14.

Here is a summary of how some of the Street's top analysts reacted to the print.

Morgan Stanley: What To Like And To Follow

FireEye's earnings report was mostly mixed despite a "healthy security spending environment," Morgan Stanley's Melissa Franchi said in a research report. On the positive side of the story, total billings rose 10 percent from last year to $265 million and beat expectations and the company added 143 Helix customers which marks an acceleration from 100 last quarter and 115 last year.

On the other hand, four areas of concern were:

  • Cloud subscription billings growth slowed from 16 percent in the third quarter to 12 percent, which translated to a slowdown in annual recurring revenue growth from 10 percent in the third quarter to 9 percent;
  • Operating margins of 5.4 percent fell short of the consensus estimate of 6.1 percent;
  • Management's full year 2019 billings guidance of $910 to $930 million implies growth will slow from 12 percent in 2018 to 8 percent; and
  • Management's 2019 operating margin guidance of 5 to 6 percent offers minimal upside potential due to a higher capex spend.

Franchi maintains an Equal-Weight rating on FireEye with a price target lowered from $20 to $19.

Related Link: After Q3, Patience Is A Virtue For FireEye Investors

Bank Of America: Long-Term Strategy

FireEye's earnings were mostly positive, highlighted by an impressive 90-percent revenue retention rate, strong new logo additions along with a 15 percent year-over-year increase in transactions of at least one million dollars, Bank Of America's Tal Liani said. Despite a disappointing near-term picture, the company has multiple products in its portfolio to win new customers and upsell existing ones over time.

Over the longer term, Liani said the Helix platform will help drive more sales and its integration with FireEye's leading services/intelligence on demand is a "winning strategy."

Liani maintains at Buy with an unchanged $20 price target.

KeyBanc: Some 'Signs Of Life'

FireEye's report showed the company has "signs of life," including the highest level of new customer adds in three years, 60 transactions of at least one million dollars and record Helix additions, KeyBanc Capital Markets' Rob Owens said. The company also realized two straight quarters of non-GAAP profit and its strongest free cash flow ever.

The Mandiant business also performed well in the quarter but "has yet to be the tip of the spear" while new offerings aren't a meaningful contributor to growth acceleration. As such, the analyst said investors may want to wait for these potential catalysts to show meaningful traction before being buyers of the stock.

Owens maintains at Sector Weight.

Latest Ratings for FEYE

DateFirmActionFromTo
Feb 2019BTIG ResearchDowngradesBuyNeutral
Dec 2018Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2018CitigroupMaintainsNeutralNeutral

View More Analyst Ratings for FEYE
View the Latest Analyst Ratings

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