Analyst Note
| Mark Cash |Narrow-moat F5 Networks' 7% year-over-year revenue growth in the second fiscal quarter solidly beat Cap IQ consensus expectations due to continued momentum in selling software-based offerings for application delivery and security necessities. We believe F5's efforts to shift its portfolio toward software solutions for application orchestration, security, and automation, alongside adjusting its sales model to be more customer-centric, have resonated with customers and prospects. F5 posted strength across its geographies, and management clearly indicated that this quarter's strength was not a one-time bump from customers accelerating purchases to navigate business impacts due to COVID-19. In our view, software strength coming from application access and security demand should continue to make up for the declining systems sales as customers change their application management methodologies. We are maintaining our $175 fair value estimate; after reporting, shares jumped more than 10% to over $144, and we believe investors still have an attractive margin of safety.