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Bull of the Day: F5 Networks (FFIV)

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F5 Networks (FFIV - Free Report) is a Zacks Rank #1 (Strong Buy) that provides multi-cloud application services for the security, performance, and availability of network applications, servers, and storage systems.

The stock has been trading sideways all year, but after an earnings beat, estimates are headed higher. Bulls are now looking for a run to all-time highs and a breakout into the end of the year.

About the Company

F5 Networks focus is multi-cloud applications that enable customers to address performance, security, automation and insight. The company caters to banking & financial services, federal government Agencies, and service providers. F5 also provides a range of professional services, including consulting, training, installation, maintenance, and other technical support services.

The company has over 6,000 full time employees and is headquartered in Seattle, Washington. Founded in 1996, F5 has partnerships with large cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform.

F5 Networks has a market cap of $12 Billion and has Zacks Style Scores of “F” in Growth and “D” in Value. The stock has a Forward PE is 20 and pays no dividend.  

Q3 Earnings

F5 reported back in July, seeing a 12% beat on EPS. Revenues came in above expectations at $652 million v the $637 million expected. The company guided EPS in a range above expectations, now looking for Q4 at $2.68-2.80 v the $2.73 expected.

Management commented that “Customers’ traditional applications are generating more revenue and more engagement than ever before”. They added that customers “are accelerating adoption of modern application architectures, like Kubernetes, for new applications”.

The beat was the company’s eight straight and since that streak has begun, the stock is up over 40%.

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. price-eps-surprise | F5 Networks, Inc. Quote

Estimates

Over the last 30 days, estimates have turned higher. For the current year, we have seen estimate raised from $10.54 to $10.61. For next year, we see estimates at $11.87, up from $11.79.

In addition to estimates, some analysts have taken their price targets higher since earnings. JPMorgan Chase has FFIV at Overweight and a $230 price target and MKM Partners has the stock at a Buy and $248 target.

Firms are citing strong software growth expectations in 2022 as the reason to be bullish into next year.

The Technicals

The stock is above most moving averages, with the 50-day recently holding at $196.  The 200-day is at $190, which is further away than all-time highs at $216.15.

A couple Fibonacci setups on the charts with a smaller one drawn from the April highs to recent lows. The 161.8% extensions are $237, about 15% from current levels.

If we draw from 2018 highs to the COVID crash lows, we get an 161.8% extension target of $275. This would be a move of about 35% higher from today’s levels.

Bottom Line

F5 has struggled all year, but after the recent earnings some momentum has come back into the name. Strong software growth is expected, so watch for the company to continue to beat numbers.

On the technical front, the stock looks ready to breakout. However, it will likely need a positive catalyst to get to those price targets mentioned above.  


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