FireEye (FEYE) and Qualys (QLYS) have emerged as two of the most intriguing cybersecurity plays. Nearly the entire cybersecurity industry has benefitted from last month’s SolarWinds hack, a digital attack the federal government now blames on Russia. Market analysts far and wide have zeroed in on FEYE and QLYS as two of the industry’s rising stars. Let’s take a look at whether FEYE or QLYS is the better play moving forward.
FEYE and QLYS by the Numbers
FEYE is currently trading slightly below $22. The stock’s 52-week high is $25.53. The stock has a 52-week low of $7.54. FEYE’s lofty forward P/E ratio of 63.48 is certainly concerning, yet it should not preclude you from seriously considering adding the stock to your portfolio. Analysts are generally bearish on FEYE at its current trading price, setting an average price target of $19, indicating a potential 13% downside. Of the eight analysts who cover the stock, two recommend it as a “Buy,” five consider it a “Hold,” and one has a “Sell” rating on it.
Alternatively, QLYS is priced at $114. The stock’s 52-week high is $126.30. QLYS has a 52-week low of $63.37. The stock has a forward P/E ratio of 37.91, a figure that is about half that of FEYE’s. The average analyst price target for QLYS is $116.40, indicating a small potential upside. Of the five analysts who cover QLYS, two recommend it as a “Buy,” two view it as a “Hold,” and one suggests selling.
FEYE Vs. QLYS in the POWR Ratings
Based on the information presented above, it is difficult to make a strong case that either of these stocks is superior to the other. QLYS’s comparably low forward P/E ratio of 37.91 is certainly intriguing, yet that alone is not reason enough to invest in a stock. When in doubt, consult the POWR Ratings.
QLYS has an “A” grade in the Trade Grade component and a “B” grade in the Industry Rank and Buy & Hold Grade components. Of the 24 publicly traded companies in the Software – Security industry, QLYS is ranked eighth.
FEYE is ranked 14th of 24 stocks in the same industry. The stock has an “A” grade in the Trade Grade component and a “B” grade in the Industry Rank and Buy & Hold Grade components. It is clear that the POWR Ratings favor QLYS.
FEYE is not Invulnerable
Though shares of cybersecurity stocks have soared since the Russian cyberattack last month, it must be noted that FEYE is not invulnerable to such attacks. This cybersecurity company was also attacked in December, losing some of its security tools to digital thieves. FEYE executives are adamant the attack was state-sponsored. However, FEYE personnel deserve credit for quickly identifying the SolarWinds hack, as evidenced by FEYE’s dip and subsequent rise after these sequential events.
FEYE is currently in the midst of a transition to the cloud. Cloud cybersecurity is becoming all the more important as work shifts away from the office and into the home. FEYE may make a nearly full transition away from its legacy hardware business to the cloud and managed services. In short, FEYE is a legitimate trailblazer in the use of AI and cloud-based machine learning to identify cybersecurity threats.
QLYS is Worthy of Your Attention
Though QLYS has had some disappointing quarterly earnings in the past year, the pandemic has spiked demand for the company’s services. The increasing dependence on QLYS to safeguard information stored and transferred on the web provides much-needed hope for investors who are dismayed by QLYS’s shortened contract lengths. There is a good chance QLYS’ revenue gains will meet or exceed investors’ expectations moving forward simply because QLYS’ solutions help businesses remain flexible in the context of cybersecurity. All in all, QLYS has 20+ cybersecurity products, each of which will prove increasingly important as companies shift away from in-office work to working from home on the web.
The POWR Ratings accurately rank QLYS higher than FEYE. QLYS has a golden opportunity to cross-promote and sell its nearly two dozen cybersecurity products to customers, touting the potential to implement multiple complementary security features through a single integration.
Add in the fact that QLYS is profitable and you have even more reason to be bullish about the company’s future. If you still aren’t convinced QLYS is a solid play, consider that the company has zero debt and nearly $500 million of cash and cash equivalents.
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FEYE shares rose $0.03 (+0.13%) in after-hours trading Thursday. Year-to-date, FEYE has declined -1.26%, versus a 1.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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