NEW YORK (TheStreet) -- Shares of FireEye (FEYE - Get Report) are down 3.51% to $31.90 in pre-market trading on Monday after analysts at Piper Jaffray downgraded the stock to "neutral" from "overweight" today.
The firm also slashed the cybersecurity company's price target to $37 from $60 due to increased competition.
The company's new price target represents a potential 16% upside from the stock's current price.
"We are downgrading shares of FEYE to 'neutral' and lowering our price target to $37 (previously $60), which is based on 6.3x (previously 10.0x) EV/CY16 sales estimates," said analyst Andrew Nowinski.
"Our downgrade is primarily due to increasing competition, though we are also concerned with conflict within the channel and recent executive turnover. With FireEye set to begin lapping more difficult comparisons, we believe the factors noted above could make these comparisons even more difficult," Nowinski said.
FireEye provides cybersecurity solution for detecting, preventing and resolving cyber-attacks.
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 significantly exceeded that of the Software industry average, but is less than that of the S&P 500. 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