Analyst Note| Mark Cash |
We are increasing our fair value estimate of narrow-moat F5 Networks to $200 from $185 after its strong third quarter results and our belief that the company’s application solutions will remain needed in the long-term. Shares are fairly valued, in our view. Year-over-year revenue growth of 12% in the quarter was slightly higher than we expected while adjusted earnings of $2.76 were much higher due to lower taxes. While F5’s ability to enable modern application development and delivery are critical to cloud-native solutions, the importance of bridging the gap and enabling traditional and modern applications holistically, in any environment, provides F5 with a sustainable market presence, in our view. Additionally, we believe a heightened threat environment and the demand to protect applications sets F5 up nicely to keep customers locked into its ecosystem.