FireEye Inc (NASDAQ:FEYE) Chairman and CEO David DeWalt became frustrated with CNBC‘s line of questioning this week in the wake of his company’s latest earnings report. He was extremely optimistic about his company’s growth, although CNBC focused questions on the organic deceleration in revenues, bookings and licensing.
FireEye’s numbers solid, in spite of stock plunge
DeWalt said he’s focused on growing his business that that he has no control over Wall Street’s sentiment about his company. He apparently doesn’t think the 20% plunge in FireEye Inc (NASDAQ:FEYE)’s stock price wasn’t warranted.
“I can’t control whisper numbers and what Wall Street is thinking high-growth companies can be,” DeWalt said on CNBC. “132% growth, record numbers of new customers, expansion around the world is what we were doing.
Why did FireEye’s CEO sell?
Recently Brian Kelly of Brian Kelly Capital sold his losing FireEye Inc (NASDAQ:FEYE) position. In March, DeWalt also sold some of his FireEye stock, nearly half a million shares, for an average price of around $80 a share. He made that sale just days before the company released its latest earnings report. Kelly criticized DeWalt’s sale, questioning why he would sell his stock in the company and saying he had lost credibility with him. He said FireEye shares plunged on Wednesday because Wall Street no longer believes DeWalt that everything is fine at the company.
DeWalt apologized for selling his FireEye Inc (NASDAQ:FEYE) shares, although he said he still has more than 90% of his holdings in his company. He also pointed out that his selling was in line with what other executives at the company were doing.
FireEye lockup expiration coming soon
UBS analysts agree with DeWalt that FireEye Inc (NASDAQ:FEYE)’s first fiscal quarter results were strong. However, they warned about the lockup expiration that’s coming. In a report dated May 6, 2014, Analysts Brent Thill and Reid Menge noted that the company’s stock has fallen more than 65% since its highs in early March. They note that FireEye was one of several “high growth / no EPS” companies hit by sentiment that’s shifting toward the negative right now.
In addition, investors have been concerned because 96 million more insider shares of FireEye Inc (NASDAQ:FEYE) become eligible to be traded on May 21. The UBS team notes that out of that 96 million, 19 million belong to company executives. The CEO / chief operating officer and chief financial officer have said they don’t plan to sell any of their shares from that block. The analysts say 42 million of the soon-to-be unlocked shares are owned by venture capitalists who sit on the company’s board and have similar restrictions on insider selling.
Early shareholders who are not subject to trading restrictions hold 29 million of the shares, and UBS analysts say that out of everyone who holds shares included in this lockup, these early shareholders are probably the ones most likely to sell. If all or most of those shares are sold, it would send prices plunging, as the current average daily trading volume is just 5.5 million.
FireEye price target slashed
The UBS team says FireEye Inc (NASDAQ:FEYE) stock will remain under pressure into this lockup expiration. However, they say the company’s strong fundamentals mean it could potentially become attractive at the low end of their estimated value of between $26 and $29 a share.
They continue to rate FireEye Inc (NASDAQ:FEYE) as Neutral, but they’ve cut their price target on the stock from $78 to $40 a share. They cited “multiple compression in the overall software group” as the reason for their price target cut.