FireEye (MNDT) finished 2020 on a high, with shares of the cybersecurity specialist soaring nearly 50% last December, but that tremendous rally fizzled out in the early months of 2021.

FEYE Chart

FEYE data by YCharts

What's surprising is that FireEye is underperforming the broader market so far this year, despite reporting a solid set of results recently. And the company's 2021 guidance shows that it is on track to step up its game.

In fact, a closer look at FireEye's results indicates that the stock's recent dip may be an opportunity to buy. Here's why.

A buy stock button on the keyboard.

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FireEye is making progress

FireEye delivered record results for the fourth quarter of 2020. Its top line increased 5% year-over-year to $248 million, while non-GAAP net income increased to $0.12 per share from $0.07 per share in the prior-year period. The company also delivered robust growth on an annual basis. Full-year revenue increased 6% to $941 million, while adjusted earnings shot up to $0.31 per share, from $0.05 per share in 2019.

The massive earnings jump was driven by a 7 percentage point gain in FireEye's non-GAAP operating margin, which came in at 8% for the year thanks to the company's switch toward a service and subscription model. FireEye's revenue from the high-margin platform, cloud subscription, and managed services business increased 25% in 2020 to $302 million. Professional services revenue was up nearly 20% to $215.6 million.

These two segments produced 55% of FireEye's total revenue and helped offset the decline in the product business, which accounts for the remaining 45% of the top line. Product business revenue was down nearly 10% in 2020, which dragged down the company's overall performance.

FireEye will further reduce its reliance on the legacy product business in 2021. Product-related revenue is expected to decline 10% to 11% this year. Meanwhile, platform, cloud, and managed services revenue is expected to increase between 20% and 25%. The professional services business is expected to clock 15%-to-20% growth.

The company anticipates 6% revenue growth this year at the midpoint of its guidance range of $990 million to $1.01 billion. This could be the first year when FireEye hits $1 billion in sales. Non-GAAP operating margin is expected to increase 150 basis points at the midpoint of the company's guidance range of 9% to 10%. The margin gain will filter down to the bottom line as well, as FireEye anticipates 16% growth in earnings this year to $0.36 per share at the midpoint of its guidance range.

More reasons to buy

FireEye's slow-but-steady growth recently prompted BofA Securities to upgrade the stock from neutral to buy, with a $27 price target. This points toward significant upside from current levels. More importantly, FireEye could turn out to be a solid long-term bet thanks to the fast growth of its service and subscription businesses, which should eventually lead to better bottom-line performance.

FEYE EPS Estimates for Current Fiscal Year Chart

FEYE EPS Estimates for Current Fiscal Year data by YCharts

A closer look at FireEye's deal activity and the length of its contracts shows why the company is set up for consistent earnings growth. Last quarter, FireEye closed 64 transactions valued at $1 million or more, up from 45 in the year-ago quarter. The company says that 85% of these deals involved the purchase of three or more solutions. This bodes well for FireEye's margins, as the purchase of more products by a single customer typically reduces acquisition costs.

What's more, FireEye is locking in customers for longer time periods. The weighted average contract length for the company's platform, cloud, and managed services business increased to 26 months last quarter, up by two months from the year-ago period.

FireEye is working toward building a recurring and profitable stream of revenue that could lead to improved earnings in the future and turn it into a growth stock. That's why investors looking to add a cybersecurity stock to their portfolio should consider taking advantage of FireEye's dip.