Why FireEye Inc. Shares Will Get Hot Again

Does this analyst make a good case? Or from is it just more noise Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 8, 2014 at 11:25AM
Technology and Telecom

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of FireEye (NASDAQ:FEYE) gained 5% this morning after Wedbush upgraded the cybersecurity technologist from neutral to outperform.

So what: Along with the upgrade, analyst Sanjit Singh planted a price target of $62 on the stock, representing about 23% worth of upside to yesterday's close. So while momentum traders might be turned off by FireEye's sharp pullback in recent months, Singh's call could reflect a growing sense on Wall Street that its growth prospects are becoming too cheap to pass up.

Now what: According to Wedbush, FireEye's risk/reward trade-off is rather attractive at this point. "We are wary of any technology that claims to guarantee protection and we think FireEye executes exceptionally well on what we believe is the most pressing metric for the boardroom today: reducing the time to detection and remediation from an advanced targeted attack given that the current average is over 240 days," said Singh. "We acknowledge that the platform wars have begun and we think FireEye's is compelling as it offers an end-to-end capability to detect, block and remediate advanced attacks both at the network level and at the endpoint, which positions the company well to execute on its strategy to consolidate a $20- 25bn TAM which represents spending on legacy point solutions." When you couple that positive outlook with FireEye's beaten down stock price -- still off about 45% from its 52-week high -- it's tough to disagree with Wedbush's upgrade.