A bullish catalyst is certainly a welcomed development for holders of FEYE as the stock has really struggled to gain any sustained momentum over the past couple of years. In fact, the stock has traded within a $10-$20 range since the beginning of 2016. As many investors are aware, the cyber-security space is highly competitive with FEYE competing with companies like Palo Alto (PANW), Cisco (CSCO), Juniper (JNPR), and Hewlett Packard (HPE).
In addition to competition, FEYE has been plagued with some execution issues, particularly on the sales side. This was evidenced by the fact that from 3Q15-4Q16, the company missed sales expectations on five occasions. Furthermore, its top-line growth rates fell sharply and rapidly, with the company ultimately reporting no growth in 4Q16.
However, there are indications that the tide is finally turning. Last quarter, the company raised its 2018 billings and revenue outlook to $820-$830 mln and $815-$835 mln, respectively. And its billings growth for the quarter ramped up nicely to 21% compared to 9% in the preceding quarter. Driving the pick-up in demand was strong demand for its newer products, such as Helix, and a healthy product refresh to newer versions for its more mature products.
There was also a significant improvement in terms of profitability and cash flow generation. First, to rewind back to August of 2016, the company approved a restructuring plan to reduce operating expenses, with a goal of lowering total non-GAAP costs by at least $20 mln in 4Q16. This initiative also appears to be paying dividends now.
For instance, last quarter FEYE's operating margin improved to (3%) from (4%) in the year ago period and Non-GAAP net loss per share came in at ($0.04) versus ($0.05). Meanwhile, cash flow from operations surged by $26 mln to a positive $9 mln.
In summary, while the stock still has plenty of work to do in terms of breaking out of this prolonged slump, the fundamentals do appear to be moving in the right direction. If FEYE's operating income and free cash flow are in-line for further improvement in the near future, as Piper Jaffray projects, then brighter days may indeed be ahead for the stock.