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F5 Networks Inc FFIV

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Morningstar’s Analysis

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Systems Leads F5’s Q2 as Customers Look to Quickly Enable App Demand and Security; $185 FVE

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

We are maintaining our $185 fair value estimate for narrow-moat F5 Networks after their second-quarter results. While the spotlight has been on F5 growing its software business over the last few quarters, systems unexpectedly stole the show in the second quarter. With organizations facing a heightened threat environment while requiring capacity to handle the increased demand for applications, customers opted for familiar F5 systems as an easy solution instead of pivoting to F5’s software. We expect the systems surge to be temporary and for software to be the key growth driver long-term. In our view, F5 is well positioned for the surging reliance on applications for internal and external facing operations, especially as organizations undergo application modernization and face increased security concerns. Shares dropped over 5% to $194 after F5 reported and we view shares as fairly valued.

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Company Profile

Business Description

F5 Networks is a market leader in the application delivery controller market. The company sells products for networking traffic, security, and policy management. Its products ensure applications are safely routed in efficient manners within on-premises data centers and across cloud environments. More than half of its revenue is based on providing services, and its three customer verticals are enterprises, service providers, and government entities. The Seattle-based firm was incorporated in 1996 and generates sales globally.

801 5th Avenue
Seattle, WA, 98104
T +1 206 272-5555
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Mar 31, 2021
Fiscal Year End Sep 30, 2021
Stock Type Slow Growth
Employees 6,109