What Happened:
Shares of network application delivery and security specialist F5 (NASDAQ:FFIV) jumped 7.25% in the afternoon session after the company reported third-quarter results that narrowly beat analysts' revenue expectations. On a brighter note, earnings per share beat by an impressive 12%. Free cash flow also improved significantly compared to the previous quarter. Management added some bullish comments, stating that demand is stabilizing and that F5 Networks should be able to grow non-GAAP EPS by a double-digit percentage, which is higher than expectations. That really stood out as a positive in these results. On the other hand, its underwhelming revenue guidance for next quarter was disappointing (although next quarter's EPS guidance was in-line). Overall, this was a mixed quarter for F5 Networks, but the double-digit percentage non-GAAP EPS growth for the full year is being received well. After the initial pop the shares cooled down to $159, up 0.02% from previous close.
What is the market telling us:
F5 Networks's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was three months ago, when the stock dropped 6.85% on the news that the company reported underwhelming earnings, which narrowly beat analysts' revenue estimates. However, revenue guidance for the next quarter was below consensus estimates. Following the results, Barclays analyst downgraded the stock's rating from Overweight (Buy) to Equal-Weight (Hold).
F5 Networks is up 9.77% since the beginning of the year, and at $159 per share it is trading close to its 52-week high of $173.70 from August 2022. Investors who bought $1,000 worth of F5 Networks' shares 5 years ago would now be looking at an investment worth $907.53.
Is now the time to buy F5 Networks? Access our full analysis of the earnings results here, it's free.
Network application delivery and security specialist F5 (NASDAQ:FFIV) will be reporting results tomorrow after market hours. Here's what to expect.
Last quarter F5 Networks reported revenues of $703.2 million, up 10.9% year on year, in line with analyst expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter.
Is F5 Networks buy or sell heading into the earnings? Read our full analysis here, it's free.
This quarter analysts are expecting F5 Networks's revenue to grow 3.76% year on year to $699.8 million, in line with the 3.53% year-over-year increase in revenue the company had recorded in the same quarter last year. Adjusted earnings are expected to come in at $2.86 per share.
Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company only missed Wall St's revenue estimates once over the last two years, and has on average exceeded top line expectations by 0.97%.
With F5 Networks being the first among its peers to report earnings this season, we don't have anywhere else to look at to get a hint at how this quarter will unravel for software stocks, but there has been positive sentiment among investors in the segment, with the stocks up on average 9.12% over the last month. F5 Networks is up 2.99% during the same time, and is heading into the earnings with analyst price target of $157.02, compared to share price of $148.70.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.
It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors.
While you may have an investing style you rely on, finding great stocks is made easier with the Zacks Style Scores. These are complementary indicators that rate stocks based on value, growth, and/or momentum characteristics.
Is This 1 Momentum Stock a Screaming Buy Right Now?
Momentum investors, who live by the saying "the trend is your friend," are most interested in taking advantage of upward or downward trends in a stock's price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.
F5 Networks (FFIV)
Seattle, WA-based F5 Networks Inc, founded in 1996, provides products and services to manage Internet traffic worldwide. Its application, delivery and networking products Boost performance, availability and security of applications running on networks that use the Internet Protocol (IP).
FFIV sits at a Zacks Rank #3 (Hold), holds a Momentum Style Score of B, and has a VGM Score of B. The stock is down 1.6% and up 4.1% over the past one-week and four-week period, respectively, and F5 Networks has lost 10.7% in the last one-year period as well. Additionally, an average of 676,064.38 shares were traded over the last 20 trading sessions.
Momentum investors also pay close attention to a company's earnings. For FFIV, nine analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.35 to $11.42 per share for 2023. FFIV boasts an average earnings surprise of 6.4%.
With strong earnings growth, a good Zacks Rank, and top-tier Momentum and VGM Style Scores, investors should think about adding FFIV to their portfolios.
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F5, Inc. (FFIV) : Free Stock Analysis Report
Needham analyst Alex Henderson reiterated a Buy rating on F5, Inc (NASDAQ:FFIV), raising the price target to $180 from $175.
The company recently reported 4% revenue growth in the third quarter, to $702.64 million beating the analyst consensus of $699.39 million.
While macro pressures have weakened demand and revenue growth in the near term, F5 is still expanding GM and Operating Margins, and the analyst believes that EPS is likely to grow at or near double-digits in the foreseeable future.
Despite the current macro conditions, F5 can deliver 10%+ EPS growth on expanding margins while returning capital to shareholders, the analyst adds.
F5 has now worked off its Systems backlog and reiterated that by shipping to the Backlog, the analyst notes that Systems have a 6%-8% headwind in FY24.
The company has a strong Balance Sheet with $11.55/share in cash, nearly $1 billion in authorized share repurchases, and superb cash flow generation, Henderson adds.
Longer-term, the company is a strong play on Kubernetes, modern application workloads, and Security, notes the analyst.
When the macro improves and overdue replacement cycles occur, Henderson expects the revenue to re-accelerate.
Based on the above, the analyst increased EPS Estimates for FY23 to $11.39 from $11.02 and for FY24 to $12.38 from $12.11.
Price Action: FFIV shares are trading higher by 6.4% to $159.85 on the last check Tuesday.
F5 Networks (FFIV) came out with quarterly earnings of $3.21 per share, beating the Zacks Consensus Estimate of $2.86 per share. This compares to earnings of $2.57 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 12.24%. A quarter ago, it was expected that this computer networking company would post earnings of $2.42 per share when it actually produced earnings of $2.53, delivering a surprise of 4.55%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
F5 , which belongs to the Zacks Internet - Software industry, posted revenues of $702.64 million for the quarter ended June 2023, surpassing the Zacks Consensus Estimate by 0.67%. This compares to year-ago revenues of $674.49 million. The company has topped consensus revenue estimates three times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
F5 shares have added about 3.7% since the beginning of the year versus the S&P 500's gain of 18.2%.
What's Next for F5?
While F5 has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for F5: unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $3.21 on $703.24 million in revenues for the coming quarter and $11.07 on $2.8 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 26% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Atlassian (TEAM), another stock in the same industry, has yet to report results for the quarter ended June 2023. The results are expected to be released on August 3.
This company is expected to post quarterly earnings of $0.43 per share in its upcoming report, which represents a year-over-year change of +59.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.
Atlassian's revenues are expected to be $911.23 million, up 19.9% from the year-ago quarter.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
F5, Inc. (FFIV) : Free Stock Analysis Report
Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors.
While you may have an investing style you rely on, finding great stocks is made easier with the Zacks Style Scores. These are complementary indicators that rate stocks based on value, growth, and/or momentum characteristics.
Is This 1 Momentum Stock a Screaming Buy Right Now?
Momentum investors, who live by the saying "the trend is your friend," are most interested in taking advantage of upward or downward trends in a stock's price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.
F5 Networks (FFIV)
Seattle, WA-based F5 Networks Inc, founded in 1996, provides products and services to manage Internet traffic worldwide. Its application, delivery and networking products Boost performance, availability and security of applications running on networks that use the Internet Protocol (IP).
FFIV sits at a Zacks Rank #3 (Hold), holds a Momentum Style Score of B, and has a VGM Score of B. The stock is down 1.6% and up 4.1% over the past one-week and four-week period, respectively, and F5 Networks has lost 10.7% in the last one-year period as well. Additionally, an average of 676,064.38 shares were traded over the last 20 trading sessions.
Momentum investors also pay close attention to a company's earnings. For FFIV, nine analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.35 to $11.42 per share for 2023. FFIV boasts an average earnings surprise of 6.4%.
With strong earnings growth, a good Zacks Rank, and top-tier Momentum and VGM Style Scores, investors should think about adding FFIV to their portfolios.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
F5, Inc. (FFIV) : Free Stock Analysis Report
