Strong Fundamentals Drive F5 Networks Shares to a New High - Analyst Blog

F5 Networks, Inc.'s (FFIV) shares hit a new 52-week high of $132.58 on Dec 4, eventually closing at $132.31. This represents a one-year return of 59.8% and a year-to-date return of 48.8%. The average trading volume for the last three months aggregated over 997K shares.

F5 Networks has been gaining momentum from its strong fundamentals and better-than-expected fourth-quarter fiscal 2014 results released on Oct 29. Since the release, the stock price has moved up nearly 13%.

The company's reported revenues of $465.3 million not only increased 17.8% from the year-ago quarter but also beat the Zacks Consensus Estimate of $460 million. Improvement in the top line was primarily due to double-digit revenue growth across all its business segments due to higher customer wins along with new product rollouts.

Notably, F5 Networks' “Good, Better, Best” pricing strategy and enhanced capabilities of BIG-IQ platform has also helped to streamline its product portfolio and drive year-over-year revenue growth. Launched in 2013, BIG-IQ is a software-based management solution which facilitate in managing BIG-IP devices and application services.

The company's adjusted earnings came in at $1.29 per share, beating the Zacks Consensus Estimate of $1.22 and surging 31.6% year over year. Investors remained optimistic about the stock's performance as F5 Networks delivered a positive earnings surprise of 5.7% in the last reported quarter. The company has a market cap of $9.76 billion and a long-term expected earnings growth rate of 16.8%.

The company also provided encouraging first-quarter fiscal 2015 earnings guidance. For the first quarter, F5 Networks expects non-GAAP earnings per share in the range of $1.46 to $1.49, well above the Zacks Consensus Estimate of $1.22.

Further, F5 Networks has witnessed positive estimate revisions over the past 60 days with 4 upward revisions and no downward revision for the current quarter. The positive revisions led to a 2.5% rise in the Zacks Consensus Estimate to $1.22 per share for the first quarter of fiscal 2015.

The recent price appreciation can also be attributed to F5 Networks' upcoming product launches and growing demand for its security solutions. The company's product refreshes are expected to boost revenues, going forward. Moreover, these initiatives are expected to expand the company's total addressable market (TAM) and result in client wins.

Further, F5 Networks unveiled the latest Synthesis of Software Defined Application Services (SDAS) for its flagship BIG-IP solutions in the last reported quarter. We believe that the latest release will boost demand for F5 Networks' BIG-IP products, thereby securing revenue streams in the quarters to come.

As things stand now, we believe that better execution and focus on enterprise and service providers will place F5 Networks well in the application delivery controller market.  Nevertheless, a volatile spending atmosphere and competition from Juniper Networks, Inc. (JNPR) and Cisco Systems, Inc. (CSCO) remain concerns.

Currently, F5 Networks has a Zacks Rank #3 (Hold). However, a better-ranked stock worth considering in the Internet software industry is Attunity, Ltd. (ATTU) sporting a Zacks Rank #1 (Strong Buy).