Growing Need For Cyber Security Could Propel FireEye Stock To $24

July 9th, 2021 by Trefis Team
FEYE: FireEye logo
FEYE
FireEye

Up almost 2.4x from its low in March 2020, at the current price of $21 per share, we believe FireEye Inc. stock (NASDAQ: FEYE) has further upside potential. FireEye stock rose from $9 in March 2020 to $21 currently, more than the S&P which increased by around 90% from its lows. Further, the stock is up over 30% from the level it was at before the pandemic. However, we believe that FireEye stock could rise more than 10% to regain its 2021 high of around $24, driven by expectations of continuing demand growth and strong Q1 2021 results. Our dashboard What Factors Drove 51% Change In FireEye Stock Between 2017 And Now? has the underlying numbers behind our thinking.

FireEye Inc. is a cyber security company, specializing in the detection and prevention of major cyber attacks. The stock price rise since 2017-end came due to a 23% rise in revenue from $780 million in FY 2017 to $962 million on an LTM basis. However, a 32% rise in the outstanding share count over this period, saw RPS (revenue-per-share) drop 6% from $4.40 in FY 2017 to $4.10 in FY 2020.

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Meanwhile, FireEye’s P/S (price-to-sales) multiple rose from 4.3x in 2017 to 5.8x by 2020 end. The multiple has since dropped to 5.2x currently, but we believe that the company’s P/S ratio has the potential to rise in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns have led to a rise in online activity and driven the shift towards working from home. This has driven up the need for cyber security, which is evident from FireEye’s Q1 2021 earnings, where revenue came in at $246 million, up from $225 million for the same period in FY 2020. The company was able to control COGS and operating expenses, and this led to the operating loss dropping to just $37 million, from $63 million in Q1 2020. This helped EPS recover from -$0.35 to -$0.24 over this period.

Further, with work from home becoming the new norm and more and more businesses shifting online, we believe the need for cyber security products and services has never been higher. We believe the company will continue seeing strong revenue growth in the medium term, and if FireEye continues to successfully control expenses, profitability could rise further in the near to medium term. This will raise investor expectations, driving up the company’s P/S multiple. We believe that FireEye stock can rise more than 10% from current levels, to regain its early-2021 high around $24.

While FireEye stock may move higher, it is helpful to know how its peers stack up. FireEye Stock Comparison With Peers summarizes how FireEye compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

 

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