Vetr Blog

Crowdsourced price predictions for the stock market.

FireEye: Overvalued Former High-Flyer or Strategic Cyber Stock?

It is no surprise that technology stocks command the greatest attention from both Wall Street analysts and users. After all, growth is where the gold is, so it is no coincidence that nine of our top ten stocks in terms of ratings are technology firms. The outlier, Tesla ($TSLA), is as much a tech stock as an automaker can be, but since it actually makes cars, we can’t really count it. Otherwise, it’s a sweep.

Wall Street is not much different. The nine tech stocks in our top ten are followed by an average of no less than 31.7 professional analysts, which is a whopping degree of coverage considering the average listed stock in the U.S. has none.

When it comes to actual ratings, users are a normally a little less rosy-eyed than their Wall Street counterparts. Our most-rated stock, Apple, actually has more bearish ratings than bullish ones, a trait shared by a further four of our top ten. Generally, our users reflect a balance between bullish and bearish opinions, whereas Wall Street analysts are almost uniformly bullish when it comes to blue-chip tech stocks. Perhaps that age-old conflict of interest isn’t eradicated after all.

We’ve pointed out numerous examples of this divergence in previous posts, but this week we want to discuss FireEye ($FEYE), a fast-growing provider of cyber-security solutions to enterprises and governments. FireEye is our 10th most-rated stock, with 25 active ratings, and it is tracked in 21 watch lists. This is fairly significant, since three months ago the stock was barely followed on our platform.

However, only a mere seven of our 25 ratings are bullish, against 18 bearish. Despite being in one of the hottest sectors on the Street, our users rate the company a collective yawn; the six-month average price target is $48.72, only 5.5% away from Friday’s closing price.

Meanwhile, 20 Wall Street analysts follow FireEye. 14 rate it a buy, 12 a hold, and one lonely soul actually rates the stock a sell. Interestingly, we’d be willing to bet the majority of those hold ratings used to be buys until $FEYE’s share price fell out of bed last March and cratered from $97 to $27 in three months. The selloff was a textbook example of a high-flying, high-growth, high-multiple momentum stock running out of steam.

The question, of course, is whether our users’ bearish opinion on $FEYE is warranted at current prices. On the one hand, our gang is a pretty tech-savvy group, so we wouldn’t dismiss the pessimism right away. On the other, you only have to scan the headlines to know that cyber-security is red-hot, so we wouldn’t necessarily believe it either. Indeed, $FEYE’s 150% quarter-over-quarter revenue growth suggests the cyber-security sector is growing like a weed.

What do you think? Is FireEye an overvalued momentum darling unlikely to ever see it’s old highs again, or is it worth every penny because of the long-term potential of cybersecurity stocks? Make a rating!