Thu, Apr. 23, 12:49 PM
- Down AH yesterday after providing soft FQ3 sales guidance (and in-line EPS guidance) to go with an FQ2 beat and naming EVP Manny Rivelo its new CEO, F5 (NASDAQ:FFIV) has reversed course today. With shares having been hammered in January due to a revenue miss and soft guidance, expectations were relatively low.
- The news has triggered both an upgrade to Buy from Needham, and a downgrade to Neutral from MKM. Needham expects stronger 2H15 growth, aided by easier comps and rising telecom capex. MKM is worried about both growth and the CEO change.
- Wedbush sees 3 reasons to remain bullish. "1) Over the past 4-6 [quarters], F5 has demonstrated the capability to deftly manage the shift from hardware- to more software-based services; 2) F5’s revenue stream is increasingly more diversified to recurring and non-recurring revenue streams. 3) A stabilizing FX environment could prove a positive catalyst for revenue growth, while creating a favorable advantage for Opex and EPS."
- JMP asserts F5's ADCs remain "central to next-gen data center architectures," and sees the company's tiered pricing model (i.e. Good, Better, Best) and rising virtual (software-based) ADC sales boosting margins. It also sees further opportunity to benefit from Cisco's 2012 ADC market exit. Cisco ADC partner Citrix just reported soft networking division numbers.
Wed, Apr. 22, 4:52 PM
- Along with its FQ2 results, F5 (NASDAQ:FFIV) has announced Manny Rivelo, the company's EVP of strategic solutions (has been responsible for "strategic development, product management, and global marketing strategy"), is its new CEO, effective July 1. He's also joining the board.
- Rivelo will replace long-time CEO John McAdam, who announced plans to retire last October. McAdam will remain with F5 as chairman. Al Higginson, chairman since 2004, will move over to the role of lead independent director.
- Though F5 beat FQ2 estimates (more on EPS than revenue), it's guiding for FQ3 revenue of $475M-$485M, below a consensus of $489.4M. EPS guidance of $1.57-$1.60 is in-line with a $1.59 consensus. Not surprisingly (given the issues faced by many enterprise tech peers), F5 is blaming a strong dollar and its impact on EMEA/Asia-Pac demand.
- The ADC/security hardware vendor saw "solid sequential and year-over-year growth in sales to U.S. service providers and enterprise customers" in FQ2, aided by a rebound in $1M+ deal activity. However, EMEA/Asia-Pac sales were below expectations. The deferred revenue balance rose a healthy 23% Y/Y to $721M.
- Shares have fallen to $115.90 AH.
- FQ2 results, PR
Wed, Apr. 22, 4:07 PM
Tue, Apr. 21, 5:35 PM| 5 Comments
Sun, Mar. 29, 3:38 PM
- With shares of "mature" networking hardware vendors such as Cisco having performed better in 2014, Guggenheim Securities' Ryan Hutchinson thinks investors "should revisit growth companies, around which sentiment has been negative."
- Hutchinson, who just launched coverage on the industry, argues tech trends favor smaller, faster-growing, firms with differentiated products, and thinks the recent acquisitions of Riverbed and Aruba Networks kickstarted a new wave of M&A. "New technologies, architectures, and delivery models are disrupting traditional business models ... These include cloud computing, software-defined architectures, network function virtualization, white-box hardware, and open-source software ... We are neutral on the data networking and communications space ... but there are hidden gems to be found; we recommend secular share gainers."
- His top picks are application delivery controller leader/security upstart F5 (FFIV - $130 target), carrier/enterprise Wi-Fi vendor Ruckus (RKUS - $15 target), and DNS/IP address management hardware vendor Infoblox (BLOX - $30 target).
- Hutchinson argues F5's "stable core ADC growth and strong cash flow generation, combined with expansion into adjacent service provider and security verticals should drive the stock price higher." He adds there's more room for F5 to gain ADC share due to Cisco's exit, and considers shares inexpensive at 11x forward free cash flow.
- He notes Ruckus is the #2 U.S service provider Wi-Fi vendor behind Cisco, and will be #3 in enterprise Wi-Fi once the HP/Aruba deal closes. [W]e believe RKUS is well positioned for organic growth and total addressable market (TAM) expansion with new product additions; becoming an increasingly attractive takeover target."
- Infoblox is expected to benefit from new management, a rebuilt DDI appliance pipeline, and growing security attach rates. "[W]e believe BLOX is successfully executing on its transformation from a 'nice to have' to a line item in IT budgets; we believe the company can generate growth at or above 20%."
- Previously: F5 bulls eye security, mobile growth after sales miss
- Previously: Deutsche upgrades Infoblox, sees a cloud play
Tue, Mar. 24, 3:54 PM
- Buyback-happy U.S. firms are prohibited from repurchasing shares from about five weeks prior to releasing quarterly earnings to about 48 hours after those reports. These blackout periods, says Goldman, may offer an especially tasty time for investors to pick up shares of their favorites.
- "High valuations in the absence of corporate demand may weigh on stock prices," says Goldman's Amanda Sneider, and particular areas of focus are tech, consumer discretionary, and financials - they've accounted for more than 50% of buyback activity.
- Goldman's buyback blackout theme buys: SanDisk (NASDAQ:SNDK), Yahoo (NASDAQ:YHOO), Travelers (NYSE:TRV), Apple (NASDAQ:AAPL), Juniper Networks (NYSE:JNPR), Xerox (NYSE:XRX), Torchmark (NYSE:TMK), F5 Networks (NASDAQ:FFIV), Citrix Systems (NASDAQ:CTXS), Aon (NYSE:AON), Moody's (NYSE:MCO), VeriSign (NASDAQ:VRSN), Hartford Financial (NYSE:HIG), Ameriprise (NYSE:AMP), Corning (NYSE:GLW), Time Warner (NYSE:TWX), Seagate Technology (NASDAQ:STX), Viacom (NASDAQ:VIAB), Legg Mason (NYSE:LM), XL Group (NYSE:XL), DirecTV (NASDAQ:DTV), Allstate (NYSE:ALL), Nvidia (NASDAQ:NVDA), CBS (NYSE:CBS), Macy's (NYSE:M), Kohl's (NYSE:KSS).
Mon, Mar. 9, 9:52 AM
- Barclays has downgraded F5 (NASDAQ:FFIV) to Underweight, albeit while keeping its $114 target intact. Gigamon (NYSE:GIMO) has been upgraded to Overweight, with its target hiked by $5 to $26.
- The F5 downgrade follows a January plunge caused by a revenue miss and soft guidance. Wedbush offered a more positive take on the ADC/security hardware vendor last week, praising its diversification efforts, valuation, and ongoing mix shift towards software and software-based services. Software revenue rose 44% Y/Y in calendar Q4 (compares with 14% total revenue growth).
Fri, Feb. 6, 10:14 AM
- Ahead of its acquisition by P-E firm Thoma Bravo, Riverbed has struck a deal to sell its SteelApp virtual (software-based) application delivery controller (ADC) business to Brocade (BRCD +0.6%) for an undisclosed sum. JPMorgan observes the business had 2014 revenue of $55M.
- ADCs balance loads and provide other higher-level traffic management and security services to servers running Web and enterprise apps. The market's growth has slowed in recent years, but the virtual ADC segment has been a strong point - Dell'Oro estimates virtual ADC sales grew 17% Y/Y in Q3, while physical ADCs fell 1%.
- SteelApp has a bit in common with Brocade's Vyatta virtual router line: They both offer software that allows networking functionality to be migrated to commodity hardware, and thereby serve as examples of network functions virtualization (NFV).
- Brocade, which had already developed a virtual ADC through Vyatta: "We are thrilled to add SteelApp's widely-adopted solution to our portfolio and will invest our existing ADC resources to aggressively advance [our] roadmap and extend it into our open Vyatta Platform offering for NFV and SDN."
- The purchase takes aim at F5 (FFIV +1.2%), which has long dominated the ADC market (52% estimated Q3 share) with the help of its proprietary TMOS OS and related ecosystem, but which also hasn't been immune to the ADC hardware market's slowdown. F5 stated on its FQ1 CC (transcript) virtual ADCs were the fastest-growing part of a software business that saw 44% Y/Y growth.
Fri, Jan. 23, 12:27 AM
- Stifel cut F5 (NASDAQ:FFIV) to Hold on account of the company's FQ1 revenue miss and light FQ2 guidance. But Buckingam Research upgraded to Buy due to the resulting nosedive, and a few other sell-side firms defended the ADC/security hardware vendor, generally arguing non-ADC growth opportunities will help the company rebound.
- D.A. Davidson's Mark Kelleher: "F5 offers the most complete application delivery platform in the market. Its [TMOS OS] provides the foundation for a wide variety of Application Delivery modules, allowing the company to continuously expand its total addressable market ... we expects its security portfolio to drive significant growth."
- William Blair's Jason Ader: "We see this as an execution blip for F5 rather than anything reflective of a weak macro environment or structural issues in the business ... In retrospect, we believe that management was overly optimistic on the heels of a stellar second half of fiscal 2014 and misread timing on a handful of large deals in the seasonally soft first quarter."
- Credit Suisse's Vlad Rom is upbeat about F5's exposure to enterprise app deployments and (through its Diameter signaling offerings) 4G buildouts, as well as its security growth. But he cautions "security/wireless product ramps are necessary to drive mid-teens revenue growth," given the core ADC market's growth is set to slow to the mid-single digits. Barclays' Ben Reitzes raised similar concerns.
- Pac Crest's Brent Bracelin notes shares now go for only 10x his 2016 free cash flow estimates on an EV/FCF basis. They finished Thursday trading down 10%.
Thu, Jan. 22, 12:45 PM
Thu, Jan. 22, 9:15 AM
Wed, Jan. 21, 5:35 PM
Wed, Jan. 21, 4:29 PM
- In addition to missing FQ1 revenue estimates (while beating on EPS), F5 (NASDAQ:FFIV) is guiding for FQ2 revenue of $465M-$475M and EPS of $1.48-$1.51, below a consensus of $478.9M and $1.53.
- CEO John McAdam: "In addition to the seasonal softness we normally experience in the first quarter of a new fiscal year, product sales during the quarter reflected a marked decrease in the number of deals greater than $1 million." However, he insists "the number of large deals in the current pipeline is encouraging and indicates [F5] should see a resumption of the recent trend toward larger deals in [FQ2]."
- FQ1 product revenue +10% Y/Y to $240.9M; services revenue +18% to $221.9M. Software revenue rose 44%.
- $750M has been added to F5's buyback authorization, raising its available funds to $930.7M. $150M was spent on buybacks in FQ1, boosting EPS.
- Smaller application delivery controller vendor Radware (NASDAQ:RDWR) is down 2% AH. Barclays' Jan. 14 downgrade of F5 was well-timed.
- FQ1 results, PR
Wed, Jan. 21, 4:10 PM
Tue, Jan. 20, 5:35 PM
Wed, Jan. 14, 11:16 AM
- Barclays' Ben Reitzes: "We are lowering our rating on F5 (NASDAQ:FFIV) to Equal Weight based on our view that the risk/reward equation is balanced at current levels despite positive fundamentals." His target is still $136.
- The downgrade comes ahead of F5's Jan. 21 FQ1 report. Shares go for 19x estimated FY15 (ends Sep. '15) EPS. The FY15 revenue growth consensus is at 13.5%.
FFIV vs. ETF Alternatives
F5 Networks Inc provides Application Delivery Networking (ADN) technology that secures and optimizes the delivery of network-based applications and the security, performance and availability of servers, and other network resources.
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