Shares of FireEye (NASDAQ:FEYE) have dropped as much as 49% since reaching a peak of $97.35 on March 5. Despite the sell-off, industry fundamentals remain very good, and the integration with Mandiant appears to be progressing well as the company separates itself from competitors like Symantec (NASDAQ:SYMC) and Intel (NASDAQ:INTC). Is this a buying opportunity?

Shares of FireEye were and are expensive
FireEye has been leaving investors breathless since announcing its merger with Mandiant. From a headline perspective, $1 billion is a high price to pay for a company that has only 500 customers, especially when the company writing the check is only expected to make $407 million in revenue, even after the integration. That said, it didn't stop the stock from more than doubling after the two companies formally combined on Dec. 30. But the timing was uncanny. Just two days before the company priced its 14 million-share follow-on offering, the share price peaked. Even after the 49% fall though, the stock isn't cheap. At Friday's close of $50.36, the stock is expensive at 19 times 2014 sales.

The fundamentals are remain very strong.
Forgetting the valuation for a minute, the business fundamentals are strong. Unlike many areas in technology, data security is one of the few that isn't subject to wide seasonal or cyclical fluctuations -- and attacks are increasing in regularity and ferocity. Last year, Target and Neimen Marcus had massive data breaches. This year, the entire Bitcoin currency was nearly wiped out over hacking attacks. The attack on Target led to the CIO being forced to resign.

The Niemen Marcus attack left 1.1 million customers vulnerable, and since that attack, 2,400 of those credit cards were used fraudulently. After Mt. Gox was left vulnerable, a hacker even went so far as to post anonymous customer balances on CEO Mark Karpeles' blog. The problem of data breaches has high costs and isn't going away.

Antivirus vendors such as Symantec and Intel's McAfee have been the way to protect against desktop intrusion, but as attacks become more network-based, funding is being shifted from the traditional anti-virus solutions toward more network-based technology, such as FireEye.

Just this week, the Federal Financial Institutions Examination Council said it had seen a rise in the number of denial-of-service attacks on bank websites. These types of attacks can be a way of distracting the IT personnel when trying to mask attacks in other areas of the system.

The attacks are widespread
The banks aren't the only industry to come under fire, though. Journalists, via state-sponsored hacking, have been another segment of the population over-represented in attacks. According to research provided by two Google engineers, 21 of the top 25 news organizations have been attacked. Forbes, The Financial Times and The New York Times have all come under attack by the Syrian Electronic Army. The New York Times had an especially busy year, also fending off attacks originating from a cyber unit of China's People's Liberation Army.

Unusually strong fundamentals help offset the high valuation
FireEye has been a tremendous momentum stock over the last year that hasn't traded on a consistent multiple of sales. Since profits are still negative, there is no way to value it on an EPS basis. Clearly, this stock isn't for the faint of heart, but after losing nearly half its value in one month, you have to wonder at what point it becomes worth the risk.

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David Eller has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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