Dougherty's Trebnick No Longer Buying FireEye

• Shares of FireEye Inc FEYE have declined 33.77 percent over the past three months, from a high of $$9.69 on July 10.
• Dougherty’s Catharine Trebnick has downgraded FireEye from Buy to Neutral.
• Trebnick prefers to move to the sidelines in view of the headwinds that are likely to make high growth difficult for the company.

According to the Dougherty report, “Numerous checks with CIOs, Security Professionals, and VARs have indicated a headwinds for FireEye, Inc. and, as such, we are moving to the sidelines as we are unsure the company can maintain the hyper-growth that has propelled its previous valuation.”

The departure of CFO Michael Sheridan and CTO Dave Merkel was announced at the end of Q2. Checks have also indicated “an exodus of non-C-level talent from the company,” including members of the company’s sales organization and Mandiant incident response team.

“If the departures truly constitute a "brain drain", we believe it will be difficult to continue growing at an exceptional clip, especially as the company spends more to replace the lost talent,” Trebnick explained.

In addition, Trebnick believes that FireEye is approaching a “tumultuous time,” with tough comps expected to either force the company to expand significantly or “get consumed by” rising expenses.

Earlier, the company’s high price and performance had helped it gain a strong foothold among the largest firms. FireEye had expected to continue to saturate the large enterprise segment. However, with intensifying competition, FireEye’s ability to expand within this segment has been constrained.

“[P]ressure from cheaper ATP solutions… and emerging solutions… have made it more difficult for the company to expand below its perch of federal entities and Fortune 100 companies,” Trebnick added.