FireEye Inc (NASDAQ: FEYE ) will announce second-quarter earnings after the bell on Thursday. FEYE stock used to be a Wall Street darling after surpassing $80 per share in 2014 following its IPO, but has since fallen to under $20 per share.
Source: David via Flickr (Modified)
This is a company that once boasted triple-digit growth, but with expectations low and no high-profile cyberattacks to speak of, FireEye is now flying under-the-radar. Perhaps that means now is a good time to buy FireEye stock.
FireEye Earnings Preview
FireEye reported first-quarter earnings back in May. FEYE stock fell double digits in response, with Q2 and fiscal year 2016 revenue guidance both well below the consensus. Furthermore, the company's billings rose just 23% in that quarter, a historic low.
To make matters worse, Palo Alto Networks Inc (NYSE: PANW ) issued poor guidance below expectations. Collectively, PANW and FireEye's disappointing guidance led the market to think the industry as a whole was in turmoil.
However, Palo Alto's billings were strong, and the fact that analysts expect revenue growth of just 23% from FireEye sets the perfect stage for strong Q2 earnings performance.
When FireEye reports earnings this week, it is expected to create $181.6 million in revenue, and report a loss of $0.39 per share. Those numbers will be less important than billings. The market wants to see strong billings growth because it acts as an indicator for future revenue growth.
With FireEye reporting 23% billing growth last quarter and expecting to grow revenue just 23% this quarter, the bar is quite low for FireEye to deliver a beat on both.
Buy FEYE Stock Ahead of Earnings?
FireEye stock is one of the most volatile small tech stocks in the market, which makes it especially volatile ahead of earnings. However, there are several factors at play that make FEYE stock more attractive than usual.
First, there is the mergers and acquisition story, the very real chance that FireEye will be acquired soon and that the conversation may end up a big catalyst on Thursday. Second, there are the low expectations for earnings. And finally, there is the realization that cybercrime isn't going anywhere.
Currently, cybersecurity companies are not being talked about because there have not been any major cyber-attacks. For a while, there were massive attacks on Home Depot Inc (NYSE: HD ), JPMorgan Chase & Co. (NYSE: JPM ) and others alike just about every week. It raised awareness for need of cybersecurity, and it demonstrated that these latest threats are far too complicated for older security software.
While the low volume of recent attacks is good for all, it is not the best for FireEye. Thankfully, it is yet one more reason that FireEye stock is likely presenting a "buy low" investment opportunity.
Cyber threat software is no longer being talked about, earnings expectations for both this quarter and the full year are low and FireEye stock itself is cheap as it has ever been. Collectively, it looks like a good time to own FEYE stock.
As of this writing, Brian Nichols did not hold a position in any of the aforementioned securities.
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