What Wall Street Thinks Of F5's CEO Change

F5 Networks, Inc. FFIV reported Q2 earnings Wednesday and beat expectations.

F5 reported EPS of $1.59 on revenue of $472.14 million, while analysts expected F5 to post EPS of $1.50 on revenue of $471.14 million.

The stock responded by spiking higher and recently traded at $122.94, up 2 percent.

Overall, the analysts did not have anything negative to say about the announced CEO change that will see Manuel Rivelo succeed John McAdam.

Analyst Erik Suppiger of JMP commented, "Mr. Rivelo has served as EVP of Strategic Solutions for F5 since 2011, and we view his selection favorably as we believe he possesses a strong technical vision that will enable the company to transition toward a more software and cloud-oriented company."

Below are highlights from analysts following the earnings release along with current ratings and price targets.

Cantor Fitzgerald - Buy, $140 price target

"Despite the FX situation, F5 highlighted a return to large-sized deals (over $1 million) in North America and management remains positive on the fundamental drivers of the company's business. Along with last night's earnings report, F5 Networks announced that Manny Rivelo (currently EVP of Strategic Solutions) will succeed John McAdam as the company's CEO, effective July 1, 2015. Overall, we are pleased with F5's performance in a very challenging macro environment and are increasing our EPS estimates but reducing our sales forecast on FX headwinds. Trading at just over 14x our CY:16 EPS projection (ex-cash) with our model reflecting 18 percent EPS growth in FY:15, we continue to believe F5 represents an attractive GARP stock and we reiterate our BUY rating."

Wedbush - Outperform, $140 price target

“FFIV’s F2Q15 beat leaves us increasingly confident about F5’s ability to continue driving double-digit top- and bottom-line growth in ‘15 for three primary reasons: 1) Over the past 4-6 Qs, 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. While there is risk to the company’s effort to transition products to a more “virtual” offering, we continue to believe the company will thrive in a sector where companies with a core competency in software are increasingly more likely to outperform their peers.”

JP Morgan - Neutral, $105 price target

“F5 delivered an EPS beat in the quarter on in line revenues as costs paced below our model. Guidance, however, was weak as the company factored in demand weakness due to the strong USD. Underlying demand seemed relatively strong as the company continues to battle tough comps from last year[...]F5 guided for FQ3 revenues of $475m - $485m, 1.6 percent lower than our estimate and 2.5 percent lower than consensus at the midpoint. Management said on the call that it is cautious on the demand environment in EMEA and APAC due to the US dollar strength.”

JMP Securities - Market Outperform, $135 price target

“While we are disappointed with revenue guidance for F3Q15, we remain positive on F5 for five key reasons: 1) management noted its cautious outlook is primarily due to FX headwinds, which is a transitory issue; 2) F5 beat F2Q15 consensus EPS by a wide margin, and despite guiding for slower revenue growth, management guided EPS in line with consensus, which we believe exemplifies F5's ability to maintain industry-leading operating margins; 3) F5's technology is central to next-gen data center architectures, one of the fastest growing markets in networking; 4) adoption of F5‘s tiered pricing model and growth in the company’s virtual edition appliances are fueling a shift to software that is favoring GMs; and 5) the replacement opportunity resulting from Cisco exiting the ADC market is still driving significant growth.”