Goldman says sell FireEye as transition risks underestimated
Goldman Sachs downgraded FireEye (FEYE) to Sell from Neutral, saying that the Internet security company's transitions create medium-term risks for the stock. TRANSITIONS: FireEye's customers are changing their buying patterns, and the company is looking to move into the mid-market from the high-end market, according to Goldman Sachs analyst Gabriela Borges. The changed buying patterns will pressure the company's fundamentals next year, warned Borges. Meanwhile, the move into the subscription/services portfolio market "will be difficult to execute," due to the competitive environment and cost effectiveness issues, she believes. The Street continues to underestimate the challenges that these transitions pose, the analyst warned. DELAYED GRATIFICATION: Even if FireEye's efforts are successful, they probably won't bear fruit next year, according to Borges. That's because the company is introducing new products, and "sales cycles usually take 6-9 months," while the company's mid-year launch may not coincide favorably with companies' budget cycles, according to Borges. PRICE TARGET: Borges cut her price target on the stock to $11 from $15. PRICE ACTION: In early trading, FireEye fell 6.5% to $13 per share.