Analyst’s predictions were for a loss of $1.30 for fiscal 2016, but when FireEye released its Q4 2015 earnings, it predicted a potentially more optimistic loss per share of around $1.20-1.27 for 2016.
However, there are some issues that FireEye still needs to address. It expects to slow down capital expenditure from its initial estimate of $50 million to $35 million. This is realistic, as the company has the opportunity to grow without a massive outlay. However, its billing growth of 21% compared to revenue growth of 29% is an indicator of slow demand at the moment, especially as it is significantly lower than its competitors which are predicting up to 60 percent growth.
FireEye Stock Rising
FireEye shares began to rise in mid February after its gradual decline which had seen it lose over 70 percent of its value since June last year. The recent announcement of its more upbeat prediction and reduced capital expenditure has pushed FireEye’s to a steady growth in value since then.
While this is a positive sign, in order to further strengthen its position in the cybersecurity sector, FireEye has made several partnerships with other companies that will provide new security solutions in key areas. With its recent acquisitions and partnerships made in January and February 2016 such as the acquisition of Invotas and ISight Partners, FireEye has widened the range of services it can offer.
Some key factors have helped FireEye overcome the difficult times. The expected value of the cybersecurity market is $170 billion by 2020 and FireEye’s successful transformation toward being an “as-a-service” provider is a big advantage. It also has the possibility to grow without any significant increase in spending which should help it strengthen its market position.
However, probably its biggest comparative advantage is its diversified portfolio that allows it to serve small and medium sized businesses with its range of in-demand services. With cloud spending expected to double by 2019 from the $16 billion in 2015, this is a huge growth area for FireEye and could help it become profitable by mid-2017.