NEW YORK (TheStreet) -- D.A. Davidson initiated coverage of FireEye (FEYE) - Get Report on Friday, setting a "buy" rating and a $51 price target for the network security company.

Shares of FireEye were gaining 1.6% to $30.39 in morning trading.

D.A. Davidson said it expects FireEye to report a loss of $1.69 a share for full year 2015, and a loss of $1.35 a share for full year 2016.

The analyst firm sees a number of potential catalysts for FireEye over the next several months, adding that its macro risks may not be fully appreciated.

"These include potential product growth reacceleration, continued market penetration with FEYE's endpoint solution, more market awareness and traction with strategic partners (i.e. Visa), and demonstrable progress with operating leverage and a defined path to generating positive cash flow," D.A. Davidson analysts wrote. "Potential challenges investors should be cognizant of include changes in the competitive landscape, and overall company execution."

TheStreet Ratings team rates FIREEYE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate FIREEYE INC (FEYE) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, FIREEYE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • FIREEYE INC's earnings per share declined by 6.1% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIREEYE INC reported poor results of -$3.13 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings (-$1.73 versus -$3.13).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Software industry average. The net income has decreased by 14.3% when compared to the same quarter one year ago, dropping from -$116.82 million to -$133.57 million.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.71 is very high and demonstrates very strong liquidity.
  • You can view the full analysis from the report here: FEYE