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FireEye Inc (FEYE) Stock Is Ready for a Revival

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FireEye Inc (NASDAQ: FEYE ) has caught fire so far in 2017, thanks to the company's improved operating metrics and growth prospects in the quarters ahead. But with FEYE stock up almost 28% over the past three months, investors are now - understandably - questioning the enterprise cybersecurity company's risk-versus-reward profile.

Why FireEye Inc (FEYE) Stockholders Have More Reasons to Feel Secure

Source: David via Flickr (Modified)

But it would be a mistake to part with FireEye now , especially after the company endured a difficult two years in 2015 and 2016, losing some 80% of its value in that period.

Indeed, after the 41% decline last year alone - driven by strong competition from the likes of like Palo Alto Networks Inc (NYSE: PANW ), Cisco Systems, Inc. (NASDAQ: CSCO ) and Fortinet Inc (NASDAQ: FTNT ) - FEYE stock has finally shown a bottom.

Meanwhile, FireEye's cost-cutting efforts should continue to have a meaningful impact on its bottom line. Consider that the adjusted loss for fiscal 2018 is projected to narrow from 99 cents per share to 30 cents. And that compares to an adjusted loss of $1.47 for fiscal 2017.

Combined with new product launches to grow the top line, FEYE stock - which is trading around $15.50 - can rise an additional 15%, reaching $18 per share by the end of the year.

Reasons to Like FireEye

To be sure, FireEye's first quarter revenue growth of only 3.4% wasn't breathtaking, and that management guided for fiscal year revenue growth of 2.4% to 3.1% leaves a lot to be desired. At the same time, the combination of product refreshes, acquisitions, and cost optimization have begun to pay dividends for the cybersecurity firm.

Improved sales execution, along with enhanced relationship with channel partners and product launches, including Helix and HX, drove a top-line beat and narrower Q1 loss. Notably, FireEye's adjusted gross profit grew 11% year over year to $119.3 million, while gross margin expanded 480 basis points to 68.7%.

Plus, despite a decline in billings (a closely-watched metric that underscores the strength of future revenue) to $152.4 million, it was still above Street forecast and above management's guidance of $130 to $150 million.

$100 Billion on Cybersecurity

These improved metrics, combined with product launches such as Helix and HX Endpoint Security, when taken together means FireEye is well positioned to capitalize on the growth in cybersecurity that's about to come.

According to consulting company NTT Com Security, half of the 1,000 business executives said they did not have a formal plan in place to secure and protect company data if they were hacked.

In the next three years, these organizations are expected to spend $101.6 billion on cybersecurity software, services, and hardware, according to research by the International Data Corporation (IDC). That level of spending amounts to a 38% increase from the $73.7 billion that IDC projects organizations spent on cybersecurity in 2016.

"Security has become heavily scrutinized by boards of directors demanding that security budgets are used wisely and solutions operate at peak efficiency," said Sean Pike, IDC's vice president of security products, in a statement.

Thanks to FireEye's malware sandboxing technology, used for detecting advanced security threats before they find their way into a network, FEYE stock is poised to benefit from the security growth. FireEye still has arguably best-of-breed security offering that can help secure market share from network security vendors like Cisco and Fortinet.

And with so many companies lacking adequate threat-prevention/threat-detection tools, FireEye's revenue - which have slowed in recent years - should begin to climb.

Bottom Line for FEYE Stock

Betting on cybersecurity stocks has made investors tons of money in recent years, thanks to the constant flow of hacking-related headlines, causing panic among both businesses and consumers, wondering if they're next.

Given the ever-connected world we live in, cybersecurity will remain an increasingly important part of peoples lives and the health of businesses, especially as businesses transition more towards mobile platforms and the cloud.

With FireEye management issuing a strong outlook for the second quarter and full-year 2017, FEYE stock should be owned, not traded until it reaches $18 per share.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.

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The post FireEye Inc (FEYE) Stock Is Ready for a Revival appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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