F5 Networks: A Low Risk-High Reward Play Currently Trading At An Inexpensive 10% FCF Yield

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About: F5 Networks, Inc. (FFIV), Includes: AKAM, VMW
by: High Watermark Investments
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High Watermark Investments
Deep Value, contrarian, long/short equity
Summary

F5 Networks has a leadership position in the load balancer market.

The company has been trying to grow the software component in its business and acquired NGINX to further its ambitions.

While an expensive buy, we think the market does not fully appreciate the potential that can be unlocked from NGINX and thus F5 trades much below the peer average.

F5’s growth from leveraging NGINX’s distributed offerings could lead to a re-rating in F5’s multiples, returning up to 45% from the current levels.

F5 Networks (FFIV) has been working towards growing the software in its business to further growth. In line with the company's strategy, F5 acquired NGINX. While an expensive acquisition, we think NGINX is