JPMorgan Cites Billings Growth, Attractive Valuation In FireEye Upgrade

FireEye Inc FEYE shares are little changed in the year-to-date period, rendering the stock attractive when weighed against the fundamental backdrop, according to JPMorgan.

The Analyst

Analyst Sterling Auty upgraded FireEye from Neutral to Overweight with a $20 price target.

The Thesis

FireEye's 10-percent billings growth in the December quarter reflected its true growth opportunity, Auty said in the Monday upgrade note.

With the cybersecurity software vendor up against a tougher billings comparison in the March and June quarters, Auty said he expects this to be the trough in growth in 2019.

JPMorgan expects an acceleration in billings growth throughout the remainder of the year, the analyst said.  

The fiscal 2019 guidance for 6-7-percent revenue growth is due mostly to the accounting treatment of appliance revenue, which is now a much smaller portion of the overall story, Auty said. 

"This is why we think the reality is better shown in billings and cash flow than revenue." 

Auty sees further support from new packaging and enterprise on-demand offerings.

Unlike FireEye's early days as a public company, when it focused on increasing products and SKUs, the analyst said it went through a process of simplification in 2018. The better bundling the company is doing in 2019 is reducing friction and helping the sales cycle, he said. 

The Price Action

FireEye shares were rallying by more than 6 percent to $17.08 at the time of publication Monday. 

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