Morgan Stanley Downgrades FireEye As Stock Meets Bullish Targets

FireEye Inc FEYE surged 20 percent over the last three months, but the recent outperformance may soon fade, according to Morgan Stanley. 

The Analyst 

Analyst Melissa Franchi downgraded FireEye from Overweight to Equal Weight with a $21 price target.

The Thesis

FireEye lived up to Morgan Stanley’s bullish expectations, Franchi said in the downgrade note: it improved its product portfolio, expanded its renewal base and won investors with better execution. (See her track record here.) 

Billings estimates have increased and annual recurring revenue has consistently grown, the analyst said. 

FireEye's momentum may continue through 2019 with help from declining billings drag and continued growth in new and renewed subscriptions, Franchi said. 

“We continue to believe that FireEye's simplified go-to market and pricing strategy, revitalized salesforce and built-out product portfolio will allow the company to sustain low-teens billings growth through FY19, even as comps get more difficult." 

Yet declining product revenues — potentially offset by a tailwind of base renewals — may present a headwind thereafter, the analyst said.

Morgan Stanley sees growth opportunity in FireEye's recently launched products, “but the improved market momentum they've seen of late will need to continue as the new products gain greater scale and sales execution has more limited room for error,” she said. 

Price Action

FireEye shares were plunging 4.92 percent to $18.56 at the time of publication Thursday. 

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