Citi Comments on Future of F5 Networks

Citi published a research report on F5 Networks FFIV that noted a balanced business approach. In the report, Citi wrote, "Our checks continue to point to a favorable competitive environment for F5. However, our survey work also supports the lingering concerns about overall slowing demand for the ADC market. This, combined with increasing macro headwinds around the globe (EMEA, Government, and Japan stand out, 22%, 10%, and 5-7% revenue, respectively), tougher comps, and topline growth decelerating from 35%- 45% Y/Y over the past year to 26.5% in June and exiting 2011 in the 20-25% range. Finally, we expect limited incremental leverage to F5's best inclass margins and model operating margins relatively flat at ~38% over the next year." The report also advised keeping an eye on sales traction of new product VIPRION 2400, and the operating margin, which appears to be declining. Citi rated F5 a High Risk Hold with a target price of $115.00. F5 Networks closed yesterday at $111.00.