What happened
Shares of FireEye Inc. (MNDT) rose 19.3% in 2017, according to data from S&P Global Market Intelligence, as the need for the cyber-security specialist's products became significantly more clear.
It certainly wasn't an easy ride for FireEye bulls, however. The stock's first big move of 2017 was a nearly 17% drop in the month of February, after FireEye revealed that several large deals failed to close as expected in its fourth quarter of 2016. If that wasn't enough, both FireEye's chief financial officer and the executive chairman of its board announced their respective resignations from the company -- though neither departure appeared to be the result of broader concerns with the business.
Image source: Getty Images.
So what
FireEye stock more than recouped those losses with its first-quarter report in May, which was punctuated by modest (but better-than-expected) revenue growth of 3.4%, and significantly narrowed adjusted losses as the company worked to improve its operational efficiency. Recall like many relatively young tech leaders, FireEye consciously forsakes bottom-line profitability as it works to take market share and drive top-line growth.
Around the same time, FireEye announced the general availability of its new cutting-edge security operations platform, Helix, the positive customer reception for which spurred upgrades from several analysts on the heels of that Q1 report.
Sure enough, FireEye continued to rise later in May as at least one analyst noted that it should benefit from Helix and recent cyberattacks, including an outbreak of ransomware virus WannaCry that affected roughly 300,000 computers worldwide in a matter of days.
Similarly, FireEye jumped another 13.5% in the month of September after news emerged that its Mandiant incident response team had been hired by Equifax (EFX -8.49%) to investigate a data breach affecting the sensitive personal information of almost 146 million Americans.
Now what
Sure enough, FireEye followed in November with strong third-quarter 2017 results, highlighting continued modest revenue growth and further narrowed losses.
For the fourth quarter, however, FireEye told investors to expect revenue of $190 million to $196 million, and an adjusted net loss per share ranging from breakeven to $0.03. That would have been well and good, but consensus estimates on Wall Street were already predicting results near the high end of those ranges. FireEye shares plunged 10% the following day in response.
To be fair, FireEye management noted that their outlook was conservative, namely as it became clear that some larger subscription opportunities in its pipeline appeared to have shorter-than-expected contract lengths.
But investors should also keep in mind that FireEye has a habit of under-promising and over-delivering. And something tells me that will be the case again when FireEye next releases its latest quarterly results next month.
