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FireEye Stock Can Rebound as Global Threat of Cyber Crime Rises

NEW YORK (TheStreet) – If you own shares of enterprise security company FireEye (FEYE - Get Report) you've felt anything but secure this year. Since reaching a 52-week high of $97.35 in March, the stock has been down by as much as 73%, reaching a low of $25.58 on May 15.

Shares are currently trading around $34, down 22% on the year to date, trailing the tech sector's 9% gain. FireEye reports financial results for its second quarter Tuesday.

Investors who have held on beyond March are kicking themselves. Now, however, it is important to  identify where is the stock heading from here.

FireEye shares, which have already bottomed, are now trading at a discount to their fair value. Matthew Nikman, an analysts at Goldman Sachs, believes FireEye is worth $42 per share, which represents roughly 28% premium from Friday's close. Nikman believes FireEye's growth prospects are more attractive that others within the industry including Cisco (CSCO) and Juniper (JNPR).

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In his research note to investors, Niknam dispelled investors' concerns about FireEye's growth rate, saying:

"We expect growth to reaccelerate in 2Q14, following a wave of recent product launches, and we expect concerns around FCF burn to moderate, as we expect trough levels in 2014 before an above consensus ramp in 2015."

That is a pretty strong endorsement for a stock that recently plummeted more than 70% in a span of just a couple of months. In other words, Niknam believes the fears have been overblown. He's right.

When compared to rivals Palo Alto Networks (PANW) and F5 Networks (FFIV), FireEye's absolute results have not swayed that drastically from its peers.

What's more, unlike other rivals within the security space, FireEye is the only one that has the ability to double its customer base in the next couple of years. Management, through aggressive sales and marketing efforts, has already doubled its market share in the past two years.

With the global demand expected to grow for cyber-threat protection, FireEye should have no problems meeting its future growth expectations. As it stands, cyber security is still an under-penetrated market. Data suggested that only 33% of corporations are able to detect when a breach has occurred.

In the wake of Target's (TGT) credit/debit card breach that impacted more than 70 million consumers, corporations are going to be more vigilant about their data.

From my vantage point, there aren't many companies that are as well prepared as FireEye. From an investment standpoint, this makes FireEye a must-own stock for the next couple of years. I don't believe there will be a better entry point than right now, ahead of Tuesday's report.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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