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Valued at a market cap of $11.7 billion, F5, Inc. (FFIV) is a leading provider of multi-cloud application security and delivery solutions. The Seattle, Washington-based company operates in the technology sector, providing products that secure and optimize application performance across diverse environments.
Shares of this computer networking company have slightly lagged behind the broader market over the past 52 weeks. FFIV has climbed around 27% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 27.7%. In 2024, FFIV's shares gained 11.6%, compared to SPX's nearly 18% YTD gains.
However, zooming in further, FFIV has outperformed the Fidelity Cloud Computing ETF's (FCLD) 22.8% gains over the past 52 weeks and a 4.3% increase on a YTD basis.
F5 has underperformed relative to the SPX due to a decline in revenue, particularly in its systems segment, as customers face budget constraints amid macroeconomic pressures, and this drop overshadowed the growth in software revenue.
Nevertheless, the stock surged almost 13% following its Q3 earnings release on Jul. 29, driven by better-than-expected revenue and profitability, along with an optimistic Q4 forecast. The company raised its annual adjusted EPS growth forecast to nearly 12%, fueled by resilient business spending, increased demand for its services, and a boost from the artificial intelligence (AI) boom.
For the current fiscal year, ending in September, analysts expect FFIV's EPS to grow 20.2% year over year to $10.18. The company's earnings surprise history is promising. It beat the consensus estimates in all of the last four quarters.
Among the 13 analysts covering the stock, the consensus rating is a “Hold.” That’s based on one "Moderate Buy," 11 "Holds,” and one "Moderate Sell."
On Jul. 30, Alex Henderson of Needham reiterated a "Buy" rating on F5 and raised the price target to $235 - Street-high price target, citing the company's strong financial performance, promising software growth, and attractive valuation despite macroeconomic challenges. This implies a modest potential upside of 17.7% from the current price levels. As of writing, FFIV is trading slightly below the mean price target of $201.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
