Wells Fargo Raises FireEye (FEYE) Valuation Range After Analyst Day

Wells Fargo analyst, Gray Powell, attended the FireEye (NASDAQ: FEYE) analyst day in New York on Tuesday 3/8. The two key themes were the shift to Fireeye as a service and rearchitecting the MVX engine to offer a software only service. These larger and higher margin opportunities spur the analyst to raise his valuation range while maintaining his Market Perform rating.

Overall, the tone of the event was positive and there were no significant surprises. The company stressed its shift to a subscription based model and highlighted its focus on improving operating margins and free cash flow. FEYE appeared most positive on the pace of adoption around FireEye as a Service (FaaS) and offered encouraging insights on new product categories – FEYE essentials, threat intelligence, endpoint, and software / cloud form factors.

FEYE stressed that the re-architecture of its MVX platform should be able to expand its addressable market – allowing the company to target the middle market / branch and remote locations. FEYE also outlined initiatives hitting in 2H’16 that will help operating margins improve. The analyst raised his valuation range to $16-$17 from $15-$16.

FireEye as a Service (FaaS) grew by 100% in 2015 with a Q4’15 run rate of $100MM+. This momentum is expected to continue as FaaS is expected to be the top contributor to billings growth in 2016. FaaS is so far 8%+ penetrated into the total customer base and future growth is expected from both new and existing customers including professional services customer.

In Q4’15, FEYE re-architected its MVX engine and segmented the MVX detection engine from the core appliance line. This sets up the platform to be split into hardware and virtual form factors in Q3’16, a hybrid model in Q4’16 and a cloud version in Q1’17. The broader set of form factors encompassing virtual, software and cloud could potentially broaden FEYE’s opportunity all the way to the branch/various egress points due to lower cost. FEYE gets better margins due the non-hardware form factor and they are able to expand the intelligence gathering efforts for Threat Analytics (TAP) and the HX (endpoint product). This should create a much easier and faster selling process for the company longer term.

For an analyst ratings summary and ratings history on FireEye, Inc click here. For more ratings news on FireEye, Inc click here.

Shares of FireEye, Inc closed at $17.84 yesterday.

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