FireEye (FEYE) Stock Pummeled After Revenue Miss, Job Cuts

Shares of FireEye Inc. (FEYE) were trading down -2.85 or -17.01 percent to $13.90 per share in Friday’s premarket after the company reported its second quarter earnings late yesterday after the market close. In addition to the earnings release, FireEye announced it would be cutting 300 to 400 jobs. FireEye stock closed at $16.75, down -0.52 or -3.01 percent in Thursday’s regular trading session.


Stock Analysis

Founded in 2004 by Ashar Aziz, formerly of Sun Microsystems, Milpitas, California based FireEye Inc. is a major provider of threat forensics and malware protection software and has been instrumental in taking down some of the world’s largest botnets.
The company’s main product is a virtual machine based Malware Protection System for Internet, email and file security, as well as malware analysis. FireEye’s real-time protection covers more than 4,400 customers in 67 countries and includes over 60 U.S. federal agencies, as well as several state universities and city colleges.

FireEye is the first cyber security company certified by the Department of Homeland Security and has been called to investigate high profile cyber attacks against JP Morgan Chase (JPM) Target (TGT) and Sony Pictures (SNE) among others.

For the company’s second fiscal quarter of 2016, FireEye reported a loss of -$139.3 million or -$0.86 per share compared to a loss of -0.87 in 2015’s second quarter. Non-GAAP net loss per share came to -$0.33 compared to a non-GAAP loss of $0.41 per share in the same period one year ago. Revenue for the quarter came to $175.0 million, up +19 percent from last year’s second quarter. The analyst consensus was for the company to report a net loss of -$0.39 per share on revenue of $181.6 million.

FireEye’s Chief Executive Officer, Kevin Mandia noted in the company’s press release that, “Our second quarter results showed fundamental strength in several areas -- sales of our next generation endpoint offering increased more than 65 percent from a year ago, renewal billings were strong, we added more than 300 new customers, and we closed 40 transactions above $1 million. Although total billings and revenue were below our expectations, efforts to optimize our cost structure resulted in a sequential decline in our costs and loss per share exceeded our expectations.”

According to the company’s Chief Financial Officer, Mike Berry, FireEye is still not sure exactly how many workers will be laid off, but the company expects to cut about nine percent of its controllable costs. The reduction in the workforce will probably mirror the nine percent, resulting in 300 to 400 jobs. The job cuts are part of a restructuring plan that will reduce annual costs by approximately $80 million.

FireEye’s billing was also lower than forecasts, at $181.6 million, the number missed analyst forecasts of $209.6 million. The company’s billing is an important metric which reflects future revenue under contract for firms focused on cloud software.

In addition to the revenue miss, FireEye downwardly revised its outlook for revenue for the full year for the second time: FireEye now expects full year revenue of between $716 million to $ 728 million. In the last quarter, the forecast was lowered from a range of $815 million to $845 million at the beginning of the year, to $780 million to $810 million. FireEye stock will open at the lower end of its yearly range and could test the stock’s yearly low of $11.35 per share in the near future.

Other News About FEYE

(FEYE)

Citigroup downgraded the stock from a “buy” rating to a “neutral” rating in a report released today.

Is This The New Normal For FireEye?

Morgan Stanley analyst Melissa Gorham says that after Q2 results the company is “in greater transition than initially assumed”.

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Published on Aug 5, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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