Shares of networking equipment firm F5 Networks (FFIV) are jumping $6.60, or 6.6%, to $106.34 this morning after the company last night beat fiscal Q2 EPS estimates and offered a Q3 EPS view that topped expectations as well.
The stock had been under significant pressure leading up to the report, with analysts warning of weakness as a result of Japan’s disaster and a slowdown in federal spending on networking. The report seems to have put to rest worries about those issues.
But with an in-line quarter for revenue, and with earnings estimates for this year in a wide range, there was enough last night for both bull and bear to point to in the report.
On the bullish side, Brian Marshall of Gleacher & Co. riffs on the “BIG IP,” a product from F5, to make comparisons to rap musicians.
Just when the record producers doubted Christopher George Latore Wallace (aka The Notorious B.I.G., Biggie Smalls or simply Big Poppa), he went quadruple platinum on his first album. We can create a similar situation with the investment community and FFIV, as many have recently doubted the company’s ability to post solid results/guidance in the face of a challenging environment (i.e., Japan, telco/federal spending, etc.). We believe F5 possesses tremendous future growth potential through increased penetration of accounts (i.e., box loading), continued share gains, additional module sales,international expansion,etc.”
Marshall reiterates a Buy ratin on the stock and a $135 price target.
Likewise, Brian Modoff with Deutsche Bank reiterated a Buy recommendation and a $145 price target. F5 is “back in the saddle,” as far as he’s concerned. “A highlight of the quarter was the 68% year over year growth in Asia Pacific revenues,” notes Modoff. Modoff thinks the company will see better results as new products carry the company further into cloud computing: “s. We think that Victoria (likely in May/June) and TMOS 11 (likely in June/July) have the potential to meaningfully reaccelerate F5’s product growth rate in 2H/11 and into FY12+.”
Tim Long of BMO Capital reiterated an Outperform rating on the shares and a $140 price target, while raising his EPS estimate this year to $3.63 from $3.60. “F5 continues to see strong enterprise demand, and it closed more large deals in the quarter than ever before. As many investors feared the worst and expected the company to disappoint, we believe the company’s results and guidance serve as evidence that growth remains. F5 remains the networking company that is best positioned to benefit from the virtualization, cloud, bandwidth, and applications growth in the enterprise and service provider markets.”
The bears — and I don’t have all of their notes at this time — are largely unrepentant:
Jeff Kvaal of Barclays Capital, who had warned on Monday of a long-term trend in slowing growth at F5, today reiterates his “Equal Weight” rating on the stock. Kvaal thinks, “Qualitative commentary suggests F5 is poised to return to its pattern of beating and raising – though perhaps at a more modest clip given slowing sales growth.” Kvaal raised his EPS estimate for the year to $3.69 from $3.63, and raised his 2012 view to $4.58 from $4.45.
On the other hand, Brian White with Ticonderoga reiterated a Neutral rating today, after having cut estimates back on March 28th. Today, he’s unmoved from his bearish conviction. The company missed his gross margin estimate of 82.7% in the quarter, reporting 82.5%, instead. He cut his EPS estimate for the year to $3.78 from $3.82. White sees continued trouble ahead. “The big beats and raises that F5 delivered in 2010 may be a thing of the past. After a near-term rally, we believe the stock could be susceptible to another leg down, especially without the support of the upside momentum shown last year.”
Article courtesy of Tech Trader Daily