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.