Update: FireEye Q2 Earnings

Aug. 6.14 | About: FireEye, Inc. (FEYE)

Summary

FireEye's recent Q2 results confirm the company is continuing to grow it's top-line at a rapid pace.

By almost all measures, FireEye beat consensus analyst estimates including Revenue and EPS.

Management upwardly revised FY2014 guidance for the second time.

My investment thesis of a buy/hold and purchase on any major dips is still intact.

Q2 Results Summary

FireEye (NASDAQ:FEYE) posted impressive numbers in its most recent earnings report. FEYE was able to beat both top and bottom line consensus estimates, which gives me confidence that management will be able to continue growing revenue at a rapid rate and eventually turn a profit in the coming years. With revenue of $94.5M for the quarter, FEYE beat analyst expectations by 5%. This is especially impressive considering it results in revenue growth of 184% YoY. Management also upwardly revised revenue guidance for FY2014 by over 4% to $427M. The bottom-line performance was equally as impressive as FireEye posted a loss of 55c versus analyst expectations of 60c, and FY2014 guidance suggests negative EPS of around $2.10.

FY2014 Q2 Analyst Consensus FY2013 Q2
Revenue $94.5M $90M $33.2M
Earnings (GAAP) (0.55) (.60) (2.15)
Op Ex % of Revenue 190% N/A 187%
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Long-Term Trends

FEYE continues to invest heavily in its future with management suggesting R&D and Sales/Marketing Expenses totaling 124% of revenue for FY2014. As a shareholder, I am pleased with this level of investment since it is leading directly to top-line growth, evident in the fact that the absolute number of customers has more than doubled from one year ago and revenue almost tripled. As the sophistication of hackers will only increase, FEYE is taking the necessary steps to ensure both customer retention and attraction. This will lead to a strong customer base and positive earnings as operating expenses decrease drastically as a percent of revenue.

My previous article which discusses FEYE in depth can be found here. Below are the summary points:

  • FireEye's business sustainability is clear as the demand for malware protection will only increase in the long term.
  • FireEye has "fallen back to Earth" following its huge price jump and currently trades at 34% of its 52-week high.
  • Analysts expect annual revenue growth of ~40-50% over the next 5 years.
  • Valuation suggests a $45-$50 price target over the next 12-18 months.

Disclosure: The author is long FEYE. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.