Goldman: Buyback, Product Cycles Should Help F5 Networks

F5 Networks, Inc. (NASDAQ: FFIV) reported a mixed quarter, with disappointing sales and an EPS beat. Goldman Sachs’ Simona Jankowski maintained a Neutral rating for the company, while raising the price target from $111 to $119.

F5 Networks reported its F2Q sales at $484mn, short of GS and Street estimates of $486mn. The company’s non-GAAP EPS came in at $1.68, beating the GS estimate of $1.64 and the Street expectation of $1.63. The company guided to F3Q sales and non-GAAP EPS of $490-$500mn and $1.77-$1.80, lower than the prior GS estimates of $508mn and $1.81, respectively.

Despite revenue misses, EPS came in higher, backed by better gross margins as well as lower taxes and share count, analyst Simona Jankowski commented.

Product Cycles

The company indicated significant interest in the May launch of its 100G VIPRION, and mentioned that it had already received a million-dollar order, and expects revenues to ramp from F4Q, the Goldman Sachs report said.

The BIG-IP portfolio refresh is scheduled to begin in July, with all products available over the forthcoming three to four months. “Demonstrating traction in the cloud, F5 has started seeing million dollar deals for its virtual ADC offerings deployed on AWS,” Jankowski added.

Buyback

F5 Networks repurchased about 3 percent of outstanding shares in F2Q, while raising its buyback authorization by $1bn. “We were already modeling significant upside to consensus EPS on expected buybacks, thus our EPS estimates change by less than 1% despite lower revenues,” the analyst pointed out.