Internet security company FireEye Inc. (FEYE - Free Report) gained 8.2% to $11.61, as of Monday’s close, after Bank of America’s (BAC - Free Report) Merrill Lynch brokerage unit increased their price target from $13.50 to $18.00 and upgraded its rating from “Neutral” to “Buy”. While Bank of America does not expect heavy upside in the near-term, reaching their price target will require patience.
At one point in time, FireEye was a Wall Street favorite regarding cyber security stocks; in more recent times, FireEye’s Achilles’ heel has been revenue growth. Once trading at $85 a share, the company’s stock has lost 83% of its value in the past three years. To turn their performance around, FireEye is in the process of revamping its sales team; this restructuring lies at the heart of Bank of America swinging their price target and upgrading their rating.
Fundamentally speaking, FireEye has not been meeting analyst expectations; the company forecasted Q1 revenue at $160 million while analysts’ forecasts reflected $177 million, and FireEye reported flat YoY fourth quarter revenue growth at $184.7 million and operating margins lied at -1%. Clearly, FireEye and analysts are disconnected, which encompasses the reason for their poor stock performance.
However, now with Bank of America pointing at FireEye’s potential upside, a slow and steady recovery might be in place.
FireEye is ramping up leadership, upgrading capacity, and healing channel partner conflicts. To Bank of America, FireEye’s plan to restructure their sales team in order to increase revenue is just a matter of time. Wall Street has seemed to be blindsided by FireEye historically missing analysts’ expectations and Wall Street is setting aside FireEye's recent believable statements of expectations in improved sales and organic growth in the latter half of 2017.
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