FireEye released its third-quarter earnings on Oct. 27 after the market closed. The stock was trading higher in premarket on Wednesday, Oct. 28 even though U.S. stock market futures pointed to a gap down opening. Why has FEYE's stock price been rising since the company’s third-quarter earnings call?
What business is FireEye into?
FireEye provides comprehensive cybersecurity solutions. The company provides cybersecurity solutions for governments as well as private enterprises. FireEye also has solutions for cloud platforms.
FireEye's latest news
FireEye reported revenues of $238.5 billion in the third quarter—up from $225.9 million in the same quarter last year. The company's revenues were ahead of analysts' projections of $227.7 million. FireEye’s adjusted EPS of 11 cents was also ahead of analysts' projections of 7 cents. The amount is a new quarterly record for FireEye—higher than the record set in the sequential quarter.
However, FireEye posted a GAAP loss of 17 cents per share in the third quarter. The loss was much lower than the 31 cents per share loss that the company posted in the third quarter of 2019. Commenting on the earnings, FireEye CEO Kevin Mandia said during the earnings call that they “reflect both stabilization of our product businesses and strong continued demand for our emerging solutions and services.”
FireEye expects to post revenues between $237 million and $241 million in the fourth quarter, which is similar to what the company posted in the third quarter. FireEye expects its adjusted EPS to be between 9 cents and 11 cents in the fourth quarter.
FireEye stock has underperformed this year
FireEye stock has lost 14.8 percent this year and is underperforming the S&P 500, which is up about 4.7 percent. However, FEYE stock was trading with gains of around 1.5 percent in the premarket even though the Nasdaq 100 futures were down over 1.6 percent.
Where is FEYE stock headed?
According to estimates compiled by CNN, FEYE stock has a median target price of $17, which represents an upside of 20.7 percent over the next 12 months. The highest target price of $22 is 56 percent above the current prices, while the lowest target price of $14 is about 1 percent below its current stock price.
The demand for cybersecurity solutions is expected to increase over the next decade. The COVID-19 pandemic has accelerated the pace of digitization and with rising digitization, the demand for cybersecurity solutions will also increase.
Also, due to geopolitical tensions in many parts of the world and the emergence of cyber attacks as a potent tool to malign adversaries, governments will likely be compelled to spend more on cybersecurity. From a valuation standpoint, FEYE stock is valued at an NTM PE ratio of 47x, which doesn't look high given the kind of growth that FireEye brings to the table.