On A Positive Note, FireEye Is Likely To Generate Full-Year Cash Flow In 2017

At a time when investors are thrashing FireEye Inc (NASDAQ: FEYE), Wunderlich analyst Bill Choi said the cybersecurity company’s continued reduction in costs would help it to generate full-year operating cash flow in 2017.

Overall, Lackluster Print

But, that was the only positive as FireEye’s disappointing fourth-quarter results showed inability to close large deals, reflecting lack of sales leadership in international markets and lower sales capacity.

FireEye’s fourth-quarter billings came in at $222 million, missing Street's $240 million estimate, as large deals failed to close at the end of the quarter reflecting lack of sales leadership in international markets and lower sales capacity.

The company projects first quarter revenue of $160 million–$166 million, missing the consensus estimate of $176.6 million.

FireEye also expects first-quarter billings, a closely watched indicator of future business, in the range of $130 million to $150 million, also well below the average estimate of $186.3 million.

In addition, Choi said the departures of the chief financial officer and chairman suggests a takeover is unlikely in the near term.

“In our view, the primary underlying issue is that FEYE suffers from a challenged price-to-value comparison against cheaper alternatives being built into firewalls and email protection services,” Choi wrote in a note.

That said, Choi sees MVX separation to address the competitive price gap and retaining existing customers. The analyst added that private cloud version, MVX Smart Grid and cloud MVX saw combined closing of 22 transactions in the fourth quarter.

Expectations, Rating And Price Target

Despite pointing out the uptake is slower than his expectations. Choi expects FireEye’s continued shift toward alert management and threat intelligence to drive billings growth in the second half of 2017.

However, the analyst maintains his Hold rating and cut his price target to $12 from $16 on expected headwinds to the company during the impending period of transition and restructuring.

At last check, shares of FireEye had plunged 16.58 percent on the day to $10.82 after hitting an all-time low of $10.60.