F5 Networks Cracks $100: Is Bernstein Buying The Bottom?

F5 Networks, Inc. FFIV reported its 2Q16 results broadly in-line with expectations. Bernstein’s Pierre Ferragu maintained an Outperform rating for the company, with a price target of $140.

Results

F5 Networks reported its 2Q topline growth at ~2 percent y/y, although the revenue figure represented a sequential decline of ~1 percent, and ~1.6pts below normal seasonality. This was in-line with consensus expectations, although ~1 percent below the Bernstein estimate.

The company’s earnings came in ~2 percent above the Bernstein estimate and ~3 percent higher than the consensus. “The beat came from a combination of a lower effective tax rate and a higher buyback than we expected ($200m vs. the $55m we modelled),” analyst Pierre Ferragu wrote. Gross margins and opex were broadly in-line with expectations.

Guidance

F5 Networks’ 3Q guidance missed consensus expectations by ~1-3 percent on the topline, while beating earnings expectations by ~2-4 percent.

“In a similar vein to last quarter, management expressed a conservative take on the macroeconomic environment and believe that some customers are delaying spending whilst they decide which applications they should take in the newer cloud architectures,” Ferragu commented.

The second quarter was just in line with sell-side expectations and the guidance came in significant below. Ferragu said, however, that the stock is likely to “react positively,” since these numbers are likely to have “triggered a “buy the bottom” reaction.”