F5 Networks, Inc. (FFIV) Could See Double-Digit Revenue Growth: BMO

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F5 Networks, Inc. (FFIV) Could See Double-Digit Revenue Growth: BMO

BMO Capital Markets analysts Tim Long, Ari Klein and Alex Spektor maintain their Outperform rating for F5 Networks, Inc. (NASDAQ:FFIV), as the company reported its second consecutive quarter with better results and guidance.

F5 Networks, Inc. (FFIV) earnings

F5 Networks, Inc. (NASDAQ:FFIV) reported its second consecutive quarter with better results and guidance. Product revenue growth accelerated, and beat our estimate. The serviceprovider vertical was the standout in the quarter, while government was solid as well. Gross margins were in line with our estimate, while opex was a little higher. The company repurchased about $200 million worth of stock in the quarter, a departure from the usual $50 million run rate, which we view positively. Management expects to keep adding headcount, which also has been a positive indicator. We are raising our FY2014 and FY2015 pro forma EPS estimates to $5.21 from $5.15 and to $6.05 from $5.85, respectively.

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F5 Networks, Inc. (FFIV) impact and analysis

Positive. We are encouraged by the follow-through from last quarter. We believe strong revenues are being driven by the product refresh, Cisco ACE replacements, and security. We believe these drivers will lead to double-digit revenue growth in both FY 2014 and FY 2015. We believe gross and operating margins have bottomed. F5 Networks, Inc. (NASDAQ:FFIV) remains one of the best positioned networking companies, and has improving fundamentals and an attractive valuation.

F5 Networks, Inc. (FFIV)’s valuation and recommendation

We are raising our price target for F5 Networks, Inc. (NASDAQ:FFIV) to $121 from $105, which assumes the stock trades at roughly 20x our FY 2015 pro forma EPS estimate of $6.05. We reiterate our Outperform rating.

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