Monday, April 18, 2011

F5 Networks (FFIV) at Risk Says Barclays (BCS)

F5 Networks (NASDAQ:FFIV) is still at risk concerning margin and growth, according to Barclays (NYSE:BCS) Capital analyst Jeff Kvaal, who said he is “not at ease” with how the growth of the company is slowing, along with its operating profit margin of 38 percent.

“We believe F5’s 40%+ hyper-growth phase has ended, as server virtualization matures and F5 presses into new but competitive markets,” noted Kvaal.

On the other hand, “Virtualization, cloud, and mobile data remain healthy long-term drivers of 20-25% growth – in line with F5’s consensus 2012 growth of 20%,” he added.

Even though the share price has recently gotten cheaper, Kvaal said the stock could still get punished by investors:

"We believe investors are unlikely to look through the Japan and federal concerns given last quarter’s weak results. In F1Q11, F5 was impacted by a book to bill below 1, increasing DSO’s and slower growth in the company’s core ADC market. We expect it will be increasingly difficult for the company to rebuild backlog and improve sales metrics in the face of these headwinds in the near term should they prove to be formidable."

F5 was trading at $93.38m, falling $1.31, or 1.38 percent, as of 2:43 PM EDT.

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