FireEye Analysts Have Tepid Reaction To Mixed Q1

Fighting shadowy international cyber attackers: exciting. 

Financial results and guidance posted by cybersecurity firm FireEye Inc. (NASDAQ: FEYE): a little less exciting, according to Wall Street analysts.

While FireEye has received attention for thwarting foreign cyberattacks, its mixed first-quarter results and guidance have the Street feeling mostly lukewarm. 

FireEye reported quarterly losses of 3 cents per share Tuesday, in line with Street estimates, on revenue of $210.5 million, slightly ahead of estimates.

Its second-quarter guidance, though, included a softer revenue and EPS outlook.

Several analysts found a positive in strong billings — up 38-percent year-over-year — by FireEye's consulting arm Mandiant. 

FireEye was in the news last year after Alphabet Inc.’s Google (NASDAQ: GOOGL) (NASDAQ: GOOG) and Facebook Inc (NASDAQ: FB) credited it with helping them uncover overseas cyberthreats during the midterm elections.

The Analysts

UBS analyst Fatima Boolani has a Neutral rating on FireEye with a $17 price target.

Bank of America Merrill Lynch analyst Tal Liani reiterated a Buy rating and $20 price target.

Mizuho’s Gregg Moskowitz reiterated a Neutral rating and $18 price target.

BMO Capital Markets analyst Keith Bachman maintained a Market Perform rating and $18 target price. 

The Theses

UBS’ Boolani highlighted a disappointing 6-percent drop in cloud subscription billings that pushed total recurring billings into the negative, despite strong billings for the consulting business. A quarter-to-quarter downtick in annual recurring revenue is “likely to cause consternation and pressure shares," the analyst said. 

“With the billings mix volatile … our skepticism in cloud subscription staging a meaningful recovery as FEYE angles into more competitive email and security analytics markets, and the still episodic nature of the Mandiant franchise, we struggle to underwrite much upside to current estimates." 

But BofA's Liani said “higher-growth areas should soon overcome the legacy product headwinds.” A revenue inflection is coming, and the stock should follow as growth and margins improve, the analyst said. 

Mizuho’s Moskowitz finds the stock’s price interesting but is otherwise largely unimpressed.

“We find it difficult to recommend the shares at this time given a relatively low growth profile and somewhat inconsistent execution,” he said. 

Bachman said BMO would like the stock more if cloud subscription growth were accelerating more. Still, the analyst said first-quarter cloud subscription revenue growth of 16 percent year-over-year is encouraging.

Price Action

FireEye shares were up 0.37 percent at $16.08 at the time of publication Wednesday. 

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