FireEye Inc. shares fell Wednesday despite strong earnings results, as analysts debated if one of the world’s largest security breaches would drive growth of the cybersecurity company’s cloud-based products.
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Shares moved higher in after-hours trading following the report, but headed the other way in Wednesday’s trading session as analyst reports flooded in, closing down 7.5%. At least 10 of the 18 analysts tracked by FactSet who cover FireEye raised their price targets on the stock, but there was not universal agreement that the hack was benefiting FireEye.
J.P. Morgan analyst Sterling Auty noted that the attack has definitely provided Mandiant Advantage platform — a software-as-a-service product that combines threat intelligence, security validation and other services — with a bump. FireEye has been undergoing a long-term transition from software that required hardware and on-premises solutions to a cloud-based product.
“The SolarWinds breach that FireEye uncovered is beginning to pay benefits, starting with increased demand for the Mandiant solutions offerings,” said Auty, who has an overweight rating and raised his price target to $27 from $18. “The cloud subscription business is now growing 20% while the mature legacy offerings did show some stabilization.”
UBS analyst Fatima Boolani was a little more skeptical. Boolani said that while FireEye is turning the corner in its cloud transformation, it’s not doing it quickly enough.
“While [annual recurring revenue] has encouragingly shown FireEye is turning the corner, growth is still stuck at 6-8%,” Boolani, who has a neutral rating and raised her price target to $20 from $16, said. “Taken with CY21E revenue growth only mildly ahead of consensus, and at a virtually unch. 5- 7% YoY trajectory, we see the lack of tangible Sunburst follow-thru stymying the rerating case, keeping us Neutral.”
Mizuho analyst Gregg Moskowitz said that FireEye’s lagging stock price performance compared with other cybersecurity stocks “remains somewhat intriguing” given that Sunburst increases demand for FireEye’s products. Over the past 12 months, FireEye shares are up 26%, compared with a 40% gain in the ETFMG Prime Cyber Security ETF HACK,
“That said, execution has been inconsistent over the past few years, and we’d like to see some evidence of sustainable improvement to what has been a relatively low organic growth profile,” Moskowitz, who has a neutral rating and a $22 price target, said.
Truist analyst Joel Fishbein, who has a hold rating and a $17 price target, believes “there is a mismatch between the enthusiasm from investors that shares received for the company’s role in discovering the hack and the underlying fundamentals.”
Of the 18 analysts who cover FireEye, six have overweight ratings, 10 have hold ratings, and two have sell ratings, according to FactSet data. The average price target rose to $22.36 from $21.70 on Wednesday, according to FactSet.
