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Why Is FireEye (FEYE) Down 3.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for FireEye (FEYE - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is FireEye due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

FireEye Q4 Earnings & Revenues Top Estimates

FireEye reported better-than-expected fourth-quarter 2020 results. The company’s non-GAAP earnings came in at 12 cents per share, beating the Zacks Consensus Estimate of 10 cents. FireEye’s bottom line also witnessed improvement from the year-ago quarter’s adjusted earnings of 7 cents per share.

Revenues increased 5% year over year to $248 million as well as surpassed the consensus mark of $239 million. FireEye’s overall quarterly results benefited from increased demand for cybersecurity solutions amid the coronavirus-induced work-and-learn-from-home trend.

Quarter Details

Segment wise, product, subscription and support revenues increased 2.5% year over year to $189.7 million and revenues from professional services were up 15.4% to $57.8 million.

Moreover, the Mandiant Threat Intelligence and Security Validation solutions recorded strong results.

The company closed 64 transactions valued more than $1 million each, in the fourth quarter.

However, annualized recurring revenues from FireEye’s on-premise product and related business decreased 3% year over year.

Quarterly billings returned to growth, recording double-digit rise.

Non-GAAP gross margin contracted 100 basis points year over year to 72%, due to higher mix of revenues from services. However, non-GAAP operating margin increased to 12% from 7%, mainly due to higher revenues and lower operating expenses.

Balance Sheet & Cash Flow

FireEye exited the fourth quarter with cash and cash equivalents, and short-term investments of approximately $1.3 billion, up from the previous quarter’s $942 million.

The company generated operating cash flow of $71 million in the December quarter. In the full year, FireEye generated $95 million.

Guidance

For first-quarter 2021, FireEye anticipates revenues between $235 million and $238 million. The Zacks Consensus Estimate for revenues currently stands at $239.48 million, suggesting a 1.87% improvement from the year-ago reported number.

The company anticipates non-GAAP gross margin of 70-71%. Non-GAAP operating margin is estimated to be between 6.5% and 7.5%. FireEye expects non-GAAP earnings in the band of 5-7 cents.

The company also provided outlook for full-year 2021. FireEye anticipates revenues in the $990 million-$1.01 billion band. It also expects non-GAAP earnings between 35 cents and 37 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -40% due to these changes.

VGM Scores

Currently, FireEye has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. It's no surprise FireEye has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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