Shares of FireEye (FEYE) are on the rise after Bank of America Merrill Lynch analyst Tal Liani upgraded the stock to Buy, citing the company's turnaround and "significant upside potential" over the next two years. Over the past year, FireEye has been rumored often as a takeover target, although no deal has materialized.

EYEING TURNAROUND: In a research note this morning, Bank of America Merrill Lynch's Liani upgraded FireEye to Buy from Neutral as he believes the stock offers a "unique buying opportunity," with "significant upside potential" over the next two years given a combination of "ultra-low" expectations, low valuation, new solutions and a recent sales leadership refresh. The analyst told investors that he thinks the Street underappreciates the quality of FireEye's management, its recovery strategy and the quality of its technology and solutions. Liani pointed out that FireEye has some of the most advanced threat intelligence dealing with network threats, endpoint protection and analytics and threat management tools. Additionally, the analyst notes that he sees three key drivers for growth that serve as potential catalysts for the stock, namely 6000 appliances that are due a refresh, new products such as Cloud MVX, Smart grid and Helix, and improvements to its go-to-market plan that add new sales leadership, remove sales capacity constraints and reduce the channel partner conflict. Moreover, the Street may be ignoring management's guidance for growth resumption in the second half of 2017, which is an opportunity for a positive surprise, he contended. Liani raised his price target on FireEye shares to $18 from $13.50.

TAKEOVER SPECULATION: Over the past year, FireEye has been rumored as a potential takeover target frequently. On May 6, 2016, Bloomberg argued in an article that the company's depressed valuation at the time could turn the company into a takeover target, with Cisco (CSCO) being discussed as a possible bidder. On May 24, 2016, strength in FireEye shares was again attributed to renewed takeover speculation. In June of last year, the same publication reported that Symantec (SYMC) had been in advanced talks to buy FireEye, but those discussions broke down over the former's concerns about the latter's future growth potential. Symantec ended up acquiring privately-held Blue Coat for approximately $4.65B in cash. On June 30, 2016, takeover speculation resurfaced, with Benzinga saying that FireEye was in talks with multiple bidders regarding a potential deal, but none was ever announced. On July 28 and August 19 of last year and on January 10 of this year strength in FireEye shares was again attributed to renewed takeover speculation. On February 23, 2017, ZeroHedge contributor "Cincarious Research" claimed that LifeLock (LOCK) was "looking to revamp" via an acquisition of FireEye and would be willing to pay $16 per share in a deal.

PRICE ACTION: In morning trading, shares of FireEye have jumped 9% to $11.69. Over the last twelve months, FireEye shares have declined about 36%.