Shares of internet security company FireEye (FEYE) topped out at $US95.63 on March 5 before falling more than 70%. The stock served as a poster child for the aggressive sell-off in many internet-related momentum stocks.
One of The Fly’s main complaints was FireEye’s secondary offerings of common stock.
In early March, FireEye filed to sell about 14 million shares. This offering came right near the top in the share price, which isn’t an uncommon move by companies: striking the iron while its hot.
But in April, not long after shares of FireEye’s security peer Imperva (IMPV) cratered following its earnings report, FireEye offered another 13 million shares. These shares were offered by insiders at Mandiant, a company FireEye acquired in January for $US106.5 million.
By this second offering, FireEye shares had fallen nearly 50% from their highs, and the company undertook another action that was dilutive to the stock. And while this issuance was in connection with an agreement that was announced two months before the turmoil facing FireEye’s stock, this was definitely a shareholder unfriendly move.
Further selling ensued. At the time of the second offering, FireEye was trading around $US50 per share. Today, it is trading at around $US33.
But this morning, Barclays published a new research note on FireEye (FEYE), and the firm upgraded the stock to ‘Overweight’ from ‘Equal Weight.’
Barclays said the recent pullback in the stock creates a compelling buying opportunity for long term investors.
FireEye continues to be one of the most disruptive technology names with its differentiated, virtual-machine based approach to security. We believe the recent pullback among high valuation stocks has created a more compelling buying opportunity for long term-investors and as such we are increasing our rating to OW but taking a more conservative approach with our price target and lowering to $US40 (from $US50), based on a CY15 EV/Sales of 10x.
Barclays also notes that FireEye has, “four products and four services either coming to market or potentially being announced over the next few months,” and believes the company can position itself to go after the endpoint security market currently dominated by legacy technology.
In morning trade, shares of FireEye are up about 3%. Since the beginning of this week, FireEye is up about 20%.
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