Morningstar | FireEye Ends 2018 With Record Revenue and Billings; Maintaining FVE of $15. See Updated Analyst Note from 06 Feb 2019
No-moat FireEye reported fourth-quarter revenue of $218 million, which is 6% year-over-year growth. The year closed in line with our forecast at $831 million, a 7% increase over 2017; however, FireEye's 2019 revenue guidance was lower than our expectations. We expect longer-term operating margin expansion to make up for the shorter-term revenue headwinds. In turn, we are maintaining our fair value estimate of $15 per share.For the year, billings of $856 million grew by 12%. Product, related subscriptions, and support billings grew 9%, cloud subscription and managed services billings grew by 25%, and Mandiant professional services billings grew by 5%. We believe this mix shift in growth is reflective in gross margins increasing beyond 67% from 65% in 2017. Alongside margin-accretive products, we posit that FireEye is taking strides in managing its operating expenditures as operating margin increased to negative 22% in 2018 versus negative 31% in the prior year. We continue to expect revenue to outpace expenditures and believe FireEye could post positive operating income by 2022.
Looking toward 2019, FireEye guided to a midpoint revenue growth of 6.5%, equal to $895 million for the year. In our view, we expect growth to come from markets like cloud-based security across the public clouds, endpoint and email security. Additionally, we like that FireEye is opening its Expertise-on-Demand service to all customers through its Helix dashboard. In our view, FireEye is playing to its strength in security consulting while shrewdly understanding there is a shortage of talent within the cybersecurity field. These consulting interactions could steer customers toward choosing FireEye products for cloud and networking security solutions and drive a steady stream of recurring revenue within the enterprise space.
FireEye provides intelligence-based cybersecurity solutions that allow organizations to prepare for, prevent, respond to and remediate cyber attacks. The company's portfolio of cybersecurity products and services is designed to minimize the risk of cyber security breaches by detecting and preventing advanced, targeted and other evasive attacks, as well as enabling management of security operations, including alert management, investigation and response when a breach occurs. The company provides threat detection and prevention solutions, security orchestration, analytics and management solutions, threat intelligence subscriptions, on-demand and managed service subscriptions, and other services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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