F5 Networks' (Nasdaq:FFIV) Miss "Curious" Says Canaccord

Citing some incongruities and conflicting pressures from F5 Networks (Nasdaq:FFIV), Canaccord Genuity said they're holding off on the selloff for now.

Canaccord said, "Investors were exiting F5 after the networking equipment company reported weak top-line revenues and forecast lower sales in the period ahead. Revenue of $269 million compared with Canaccord Genuity Technology Analyst Paul Mansky’s $269-million estimate and consensus of $271 million, while EPS of $0.88 compared with Mansky’s $0.82 and consensus of $0.83. Excluding R&D credit, EPS was $0.84, as volume, mix and opex controls drove EBIT margin to 38.2%, up 44 bps quarter over quarter. Importantly, demand was cited as being inexplicably week in late October, which wasn’t subsequently recovered, while leading verticals such as tech and government (including U.S. Fed) were as expected. Further, March revenue guidance of $275-280 million and EPS of $0.84-0.86 was below consensus of $281 million and $0.85. Mansky believes a December revenue miss and March guidance leaving consensus sales slightly above the range is not a price/performance match. While he is tempted to step into the selloff, several items give Mansky pause, including: a) curious nature of the miss (timing, deal size, etc.); b) tangential market execution; c) B:B < 1.0; and d) a potential product cycle “gap” ahead of September. Mansky is reverting to a revenue multiple at the mid-point between the recent high and median, or -7.5x, implying a much lower target price. He remains neutral on the name. Shares of other network-gear makers traded lower in sympathy: F5’s bigger rival Cisco Systems (Nasdaq:CSCO) dipped, while smaller companies like Blue Coat Systems (Nasdaq:BCSI) and Cavium Networks (Nasdaq:CAVM) fell considerably."

F5 was trading at $110.77, gaining $1.62, or 1.48 percent, as of 2:25 PM EST.