ThinkEquity Thinks Acquisition-Related F5 Selling Overdone

The sharp sell-off by F5 Networks (FFIV) shares following this week’s announcement of its acquisition of Acopia Networks for $210 million is overdone, ThinkEquity’s Jonathan Ruykhaver asserted in a research note Thursday. He raised his rating on the stock to Buy from Accumulate, and maintains an $84 price target.

“The relative small size of the acquisitions compared to core business suggests integration risk is overstated,” he wrote. “The core traffic management business remains strong, supported by strong fundamentals and secular trends.”

At the heart of the decline is concern about the near-term impact to earnings: Ruykhaver is expecting 11% dilution to earnings from the deal for the September 2008 fiscal year. But he says the deal “has strong potential of being materially accretive in the slightly longer term.”

Also Thursday, Ferris Baker Watts raised its rating on the stock to Buy from Neutral.

F5 shares, which plunged 21% from $83.68 at Friday’s close to Wednesday’s final mark of $66.11, Thursday rebounded $4.54, or 7%, to $70.65.

FFIV 1-yr chart: