Why FireEye, Inc. Stock Plunged Today
Shares of FireEye (NASDAQ: FEYE) fell 10% on Thursday after the cybersecurity specialist announced strong third-quarter results, but followed with conservative fourth-quarter guidance.
More specifically, FireEye's third-quarter revenue climbed 1.7% year over year to $189.6 million, and translated to an adjusted net loss of $6.5 million, or $0.04 per share. Both figures were above FireEye's guidance (provided in early August) for a wider per-share loss of $0.06 to $0.09 on revenue of $183 million to $189 million.
"We executed against our financial commitments in the third quarter, delivering billings, revenue, earnings per share and operating cash flow above expectations," said FireEye CEO Kevin Mandia. "I believe we have done an excellent job of right-sizing our cost structure over the past year while innovating faster than at any time in our history."
To be sure, FireEye also delivered billings of $201.7 million, down 6.4% year over year but near the high end of guidance for $190 million to $205 million. Within that, product subscription billings climbed an impressive 28% sequentially from last quarter to $95.8 million.
For the fourth quarter, however, FireEye told investors to expect revenue of $190 million to $196 million, with billings of $210 million to $230 million. That should result in an adjusted net loss per share ranging from break-even to $0.03. By comparison, consensus estimates predicted an adjusted loss of $0.01 per share on revenue near the high end of FireEye's guidance range.
During the subsequent conference call, FireEye CFO Frank Verdecanna elaborated that their guidance reflects both seasonal strength and continued pipeline growth for the company's Endpoint and Helix platforms. But he also noted that FireEye is taking a "slightly more conservative view of the fourth quarter" due to some larger subscription deals in the pipeline that will have shorter contract lengths than originally expected.
That's not to say FireEye can't extend its streak of under-promising and over-delivering when Q4 is all said and done. But the market is a forward-looking machine, and it's hard to blame investors for taking a step back in light of FireEye's cautious view.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.