NEW BULLISH Plays
FireEye, Inc. - FEYE - close: 40.55 change: +1.63
Stop Loss: 36.90
Target(s): To Be Determined
Current Gain/Loss: unopened
Entry on June -- at $--.--
Listed on June 30, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 5.2 million
New Positions: Yes, see below
Why We Like It:
FireEye is an advanced cyber-security company. They provide products and services for detecting, preventing and resolving advanced cyber-security threats. This is not the virus protection program you have on your PC. This is industrial strength corporate defense against the thousands of hack attempts that happen every day.
They supply web threat protection for websites that analyzes all inbound and outbound traffic. They offer email threat prevention appliances that detect and stop advanced attacks. And of course they offer file threat appliances that analyze network traffic to and from corporate servers to detect and quarantine malicious software.
I could go on with the dozens of other types of services but the point there is that they offer end to end cutting edge security for corporate networks and websites.
Everyone has heard about the 40 million credit cards lost in the Target attack. If you pay attention to the news almost every week there are a couple more retailers and corporations that have customer data stolen. This is becoming very expensive for corporations. MasterCard and Visa are changing the rules and corporations are now going to be liable for fraudulent charges made from stolen credit card info.
For a company like Target with 40 million lost cards this could run into the billions of dollars if the card data was compromised. Fortunately for Target some of the information was encrypted and not all of those cards were able to be used. Other companies may not be so fortunate in the future. This kind of network intrusion could put companies out of business.
FireEye tracks all traffic on the network so they can not only tell you what was stolen but where it went. In the case of Target it was weeks before they even knew what was stolen and they had no idea who took it. With FireEye they could have tracked it to the source in real time.
The annual Mandiant Trends report showed that advanced attacks go undetected for an average of 229 days and only one-third of organizations identify breaches on their own. Attackers are increasing their technology far faster than corporations managing internal networks.
FireEye made headlines last month when it warned that a sophisticated group of hackers had exploited a buy in Microsoft's Internet Explorer browser and Microsoft immediately went into panic mode to produce a fix for the previously unknown exploit. This company is on the bleeding edge of the cyber-security problem.
FireEye announced with earnings in May 2014 their acquisition of nPulse Technologies, a leader in network forensics. Their network forensics will be married to the Mandiant endpoint forensics to provide the only available end to end solution for visibility into the entire attack life cycle.
The company was actually guided by the CIA in the early days because there was no security against some of the advanced nation state attacks. The CIA gave FireEye a list of specifications and told them if they could block those intrusions they would be a customer. FireEye succeeded and the CIA is not only a customer but an investor in FireEye.
After Google was hacked by Chinese spies the FireEye client list expanded because nobody else could block the sophisticated attacks that Google experienced. Now government agencies all over the world are using FireEye products.
Nawaf Bitar, SVP of Juniper Networks called FireEye the "Gorilla" in the field when it comes to combating advanced attacks. Edward Kiledjian, CISO for Bombardier Aerospace and a user of FireEye products said, "This is a fantastic tool that provides invaluable information."
FireEye rallied from its IPO close at $36 in September to trade at $97 in March. Three insiders took advantage of the high price to sell shares to cover tax liabilities and they announced a secondary at $87.50. They reported earnings that included a recent acquisition. Shares declined from an overheated valuation to $40 over the next two months. The selloff in the Nasdaq momentum stocks also added to the FireEye decline.
Q1 earnings was a 53 cent loss that was right in the middle of prior guidance for a loss of 51-56 cents. Revenue of $74 million tripled was above guidance of $70-$72 million. Deferred revenue (subscriptions) spiked +$25.2 million to $212.7 million.
However, the new format for earnings with multiple reporting segments appeared to confuse investors and the stock was knocked for a -25% loss.
The company raised guidance for a full year loss up from $2.00-$2.20 to $2.10-$2.30 due to higher R&D spending to integrate recent acquisitions into the product line. The CEO told analysts they were spending more on R&D to "disrupt the market and improve their innovative technology." They are going to announce four new products over the next 90 days.
FireEye had a record quarter with revenue growth of +132% year over year. The Core FireEye business grew over 50%. The Mandiant business they acquired just 90 days ago grew by more than 50%. The company raised revenue guidance for the fourth time in six months. William Blair said the pullback in FEYE created an attractive entry point saying the earnings were "very strong" and they kept an outperform rating on the stock.
Technically shares of FEYE have gone from extremely overbought back in February-March to extremely oversold after it dropped following its earnings report in May. Now FEYE Has been slowly climbing higher. The stock has pushed past potential resistance at several key moving averages including its simple 50-dma. Plus FEYE has rallied past resistance at the top of its gap down from May 6th. Today we see FEYE breaking out past round-number, psychological resistance at the $40.00 level.
Tonight we are suggesting a trigger to open bullish positions at $41.10.
We are not setting an exit target tonight but I will point out that the point & figure chart is bullish with a $54.00 target.
Trigger @ $41.10
Suggested Position: buy FEYE stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the Sep $45 call (FEYE140920C45) current ask $3.30
Option Format: symbol-year-month-day-call-strike