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Why FireEye Stock Tumbled 43% in 2016

FEYE Chart

FEYE Chart

FEYE data by YCharts .

With FireEye now struggling to grow , those massive losses can no longer be ignored. The company announced a major restructuring in August along with its second-quarter results, and an effort to knock down costs by laying off a few hundred employees. The company has set a goal of producing positive free cash flow in 2017, but with significant stock-based compensation expense, producing a GAAP profit is still in the distant future.

Now what

FireEye expects its fourth-quarter revenue to grow by just 1%-4% year over year, although CEO Kevin Mandia is optimistic that new products will eventually return the company to robust growth:

I believe we are in the early phases of the richest new innovation cycle in our history, and these are the first of many planned releases that will help customers elevate their security profile at a lower total cost of ownership. The investments we've made in intelligence, orchestration, and integration are redefining the FireEye security platform and creating new engines for growth.

FireEye is still valued at about $2.2 billion compared to expected revenue of between $716 million and $722 million for 2016. With the company's growth grinding to a halt, the market isn't as pessimistic as it seems. FireEye will need to return to meaningful growth and improve its bottom line in 2017 just to justify its current valuation. Anything short of that could lead to another terrible year for the stock.

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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends FireEye. The Motley Fool has a disclosure policy .

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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