- FireEye shares moved sharply higher after Bank of America upgraded the stock to Buy with a $27 price target.
- Analyst Tal Liani cited strong growth in new initiatives and a stabilizing legacy business for the upgrade to Buy.
- The stock's momentum has leveled off at neutral levels, meaning it could have room to run, but the moving average convergence divergence (MACD) remains in a bearish downtrend.
Analyst Tal Liani believes that FireEye's new initiatives are growing faster than the decline in legacy. While the legacy business has stabilized with strong cash flow generation, investments in Platform, Cloud Subscription, and Managed Services have accelerated growth and comprised 58% of revenue and 66% of billings during the fourth quarter.
Earlier this week, the company reported fourth quarter earnings that beat analyst expectations, but full-year guidance came in below expectations. The company expects revenue of between $235 million and $238 million, versus a $233.7 million consensus, and earnings per share (EPS) of $0.05 to $0.07, versus a $0.07 consensus.
A consensus estimate is a forecast of a public company's projected earnings based on the combined estimates of all equity analysts that cover the stock.
From a technical standpoint, FireEye stock rebounded from reaction lows made during Wednesday's session. The relative strength index (RSI) remains in neutral territory with a reading of 48.20, but the MACD remains in a bearish downtrend. These indicators suggest that the stock could have more room to rebound, but the intermediate-term trend remains decidedly bearish.
Traders should watch for consolidation above the 50-day moving average at $19.42 over the coming sessions. If the stock maintains its momentum, traders could see a move toward trendline resistance at around $22.60. If the stock breaks down from the 50-day moving average, traders could see a move toward Fibonacci support levels of $17.94 or $15.87, although that dramatic of a decline appears unlikely given the bullish analyst sentiment.
The Bottom Line
FireEye shares moved sharply higher during Thursday's session after Bank of America upgraded the stock to Buy with a $27 price target. Despite soft full-year guidance, analyst Tal Liani believes that strong growth in new initiatives offsets a decline in the legacy business. Traders should watch for consolidation above the 50-day moving average over the coming sessions.
The author holds no position in the stock(s) mentioned except through passively managed index funds.