F5 Networks' Fundamentals Are Broken; Chowdhry Says Sell Into Strength

Shares of F5 Networks, Inc. FFIV surged Tuesday on reports of a possible sale, but fell Wednesday possibly on profit taking. Trip Chowdhry of Global Equities Research said investors should sell their shares into this "false strength."

In a note, Chowdhry said the market is moving away from of F5 Networks, and the company has "zero play in SuperCloud computing" platforms such as AWS from Amazon.com, Inc. AMZN and Azure from Microsoft Corporation MSFT.

Related Link: F5 Networks Spikes On Rumors Of Talks With Goldman For Possible Sale

The analyst noted that Verizon Communications Inc. VZ is putting up its 48 data centers for sale, Centurylink Inc CTL is "trying very hard to sell its co-location center" and Rackspace Hosting, Inc. RAX is struggling.

"We have not come across a single customer who is increasing their investments in Enterprise Data Centers. This is a secular negative for FFIV," Chowdhry wrote.

Commenting on the potential M&A, Chowdhry said it is highly unlikely that there will be multiple bidders for F5, which is a "declining asset business."

"Market is moving away from FFIV, and is not coming back. FFIV is in secular downshift and recovery is impossible," Chowdhry added.

At time of writing, shares of F5 Networks were down 3.06 percent to $120.15.