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FireEye (FEYE) Up 13.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for FireEye (FEYE - Free Report) . Shares have added about 13.8% in that time frame, outperforming the S&P 500.

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

FireEye’s Q1 Earnings & Revenues Top Estimates

FireEye recently reported first-quarter 2021 results, wherein non-GAAP earnings came in at 8 cents per share, beating the Zacks Consensus Estimate of 7 cents. The company’s bottom line also witnessed an improvement from the year-ago quarter’s non-GAAP net loss of 2 cents per share.

Revenues increased 10% year over year to $246 million and surpassed the consensus mark of $237 million. The rally was fueled by growth across each of the company’s categories. FireEye’s overall quarterly results also 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 5.13% year over year to $183 million and revenues from professional services were up 25% to $63.3 million.

Moreover, Mandiant Threat Intelligence recorded 25% year-over-year growth and Security Validation solutions reported strong results. Cloud endpoint solutions also witnessed strong traction.

The company closed 30 transactions, valued at more than $1 million each, in the first quarter.

Annualized recurring revenues increased 9% year over year. Quarterly billings recorded an 18% year-on-year rise.

Non-GAAP gross margin expanded 200 basis points year over year to 73% due to a higher mix of incident response and increased margins in cloud-hosted products.

Moreover, non-GAAP operating margin increased to 9% from a negative margin of 1%, mainly due to higher revenues and lower operating expenses.

Balance Sheet & Cash Flow

FireEye exited the first quarter with cash and cash equivalents, and short-term investments of approximately $1.3 billion, flat sequentially.

The company generated an operating cash flow of $21 million in the March quarter.

Guidance

For second-quarter 2021, FireEye anticipates revenues between $245 million and $250 million. The Zacks Consensus Estimate for revenues currently stands at $244.24 million, suggesting a 6.24% improvement from the year-ago quarter’s reported number.

Services revenues are expected between 15% and 20% year over year.

The company anticipates non-GAAP gross margin of 72-73%. Margins of the services category are expected to decline sequentially.

Non-GAAP operating margin is estimated between 9% and 10%. FireEye expects non-GAAP earnings in a band of 8-9 cents.

The company also raised its revenue and earnings guidance for 2021. FireEye now anticipates revenues in the $1.01-$1.03 billion range, up from the previously anticipated band of $990 million to $1.01 billion.

Moreover, it now expects non-GAAP earnings between 39 cents and 41 cents per share, higher than the earlier guidance of 35-37 cents.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -11.52% due to these changes.

VGM Scores

At this time, FireEye has an average Growth Score of C, a grade with the same score on the momentum front. 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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