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UPDATE: BofA Securities Downgrades F5 Networks (FFIV) to Neutral

July 20, 2022 6:10 AM EDT
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Price: $155.27 -0.3%

Rating Summary:
    19 Buy, 27 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 5 | New: 0
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(Updated - July 20, 2022 7:15 AM EDT)

BofA Securities analyst Tal Liani downgraded F5 Networks (NASDAQ: FFIV) from Buy to Neutral, PT $170.00 (from $215.00).

The analyst comments "We flag two main risks to F5’s stock in the near-term, in our view. In our July 2021 upgrade note, we discussed the conversion of F5’s customer base to multi-year contracts in mid-2019 and the expected strength of software growth starting in 2H22. Software revenue grew 47% YoY in 1Q22 and 40% in 2Q22; however, management reiterated its FY22 software growth guidance range of 35-40%, implying some deceleration in 2H22. Assuming FY22 software growth is 40% YoY, 2H22 growth needs to be approx. 37%, which is slightly above the 34%/35% growth in 3Q21 and 4Q21. However, parsing out any potential strength from the effects of multi-year renewals could crudely imply decelerating growth ex-benefit from last year. Furthermore, 2Q was the second consecutive quarter of reduction of FY22 revenue growth guidance, currently at 1.5%-4% YoY. While we believe this is already priced into the stock, we note that supply chain constraints are expected to persist until at least 2023 and the risk of a dried-up broker market, similar to 1Q21, is still high. Given F5’s smaller size and weaker relative supplier leverage versus peers, this could translate into further revenue guidance reductions. Given these risks, we downgrade F5 to Neutral from Buy, and lower our PO to $170 from $215, now based on roughly 16x FY23E P/E versus ~20x prior."

For an analyst ratings summary and ratings history on F5 Networks click here. For more ratings news on F5 Networks click here.

Shares of F5 Networks closed at $151.68 yesterday.


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Tal Liani