Is FireEye a Good Speculative Buy?FEYE) has lost over 60% of its value in the last few months. FireEye is not a profitable company yet and the market has been cruel on high-beta stocks, which has added to FireEye’s woes. However, I think FireEye is looking attractive after the pullback and the stock can be considered a great speculative play at current levels.
Long-term profit despite near-term problems
FireEye is the only cybersecurity firm which not only recognize or quarantine attacks after they hit, but also proposes threat prevention solutions.
In 2015, the company made some great deals such as security services partnership with Hewlett-Packard Enterprise, an integration deal with F5 Networks, and Visa. However, it has continued to perform badly throughout the prior few months mainly due to depressed short-term growth prospects. In spite of surging demand for cybersecurity products, the company failed to capitalize on such prospects in most recent quarters.
While FireEye will probably carry on to face growth difficulties in the short term, but the company still has a lot potential to gain profit in the approaching quarters.
According to the ITRC, an overall of 169 million personal records got affected previous year in data breaches compared to 83.4 million in 2014. By considering the above numbers, it appears that data breaches are growing at 2x rate, which clearly indicates that need for cybersecurity amenities will likely increase in the forthcoming years. Markets and Markets presumes the worldwide cybersecurity market to surge from $106.3 million in 2015 to $170 billion in 2020.
FireEye’s growth throws light on that rising demand. In 2014, its top-line climbed 163 percent on a yearly basis to $426 million. Moreover, analysts anticipate company’s revenue to surge 47 percent in FY2015 and an additional 30.5 percent in FY2016. Despite the fact that growth is slackening, the company’s business does not look like it will be topmost anytime soon, and analyst calculations doesn’t include iSight’s imminent contributions to FireEye’s revenue. The company’s total deferred top line also escalated 61 percent yearly to $454.9 million in its recent quarter, specifying that desire for its services still remains robust.
Despite the woes FireEye is still reporting robust growth. Although FireEye has struggled on the profitability front, but I think the company will turn profitable in the long run. As of now, investors should focus on FireEye’s strong growth, as the company is aiming to gain considerable market share going forward. Also, after the recent pullback, FireEye is also an acquisition target for firms like Cisco. Hence, I think investors can consider FireEye as a good speculative buy.
Published on Feb 3, 2016By Akshansh Gandhi