FireEye upgraded to Buy in STI Next Wave Portfolio

[from the 3/14/2016 edition of Smart Tech 50 Weekly Movers]

At the FireEye (FEYE) analyst day last week, management emphasized the company’s transition to more subscription-based revenue (security software offered as a service) and the associated positive implications in terms of better visibility into cash flow, greater differentiation from competitors and higher profit margins. The company is making a smart move, as IT research firm Gartner predicts that 70% of the growth in enterprise security over the next three years will come from expanded services.

Following the analyst day, Piper Jaffray upgraded FireEye stock to ‘Overweight’ with a price target of $24 (up from $15) based on the belief that the company can successfully transition to a subscription service model, resulting in an increase in recurring revenue.

Piper Jaffray called out several key positives—including a robust product roadmap targeted at new markets (including the endpoint segment), growth in international regions (the longer-term goal is to expand the non-U.S. business to half of total revenue from 30% in 2015), better use of the partner channel (including a greater contribution from value-added distributors such as Westcon Group) and the company’s ability to achieve positive operating income by the second half of next year.

FireEye is a ‘Buy’ in the Next Wave Portfolio.

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