F5 Networks (FFIV) Finds $120 Value as Demand for Data Efficiency Climbs
As more companies try to reduce overhead, they are increasingly consolidating their data centers and more efficiently delivering information over the web. F5 Networks (NASDAQ:FFIV) provides innovative solutions to customers to save money and energy for their data needs. While it competes with industry heavyweights Cisco Systems (NASDAQ:CSCO) and Juniper Networks (NASDAQ: JNPR), it has created a stable and profitable business.
The market for Application Delivery will grow from about $3 billion in 2011 to $8 billion by 2018. F5 Networks can ride this wave to a very enviable stock price as long as they continue to be among the leaders. Application Delivery comprises 62% of the stock price according our analysis. However, substantially all of the revenue is tied to this market as the remainder of income comes from installation, consulting and other services related to Application Delivery.
See Full Analysis for F5 Networks Here
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Competition with Large Players and Virtualization
Despite the huge incentives for companies to apply F5 Network’s technologies, many competitive risks remain. The elephant in the room is Cisco which already has a massive customer base and a huge research and development team. The company must also be worried about cheaper competitors such as China’s Huawei which can undercut the company’s pricing.
Virtualization comprises another risk to F5 Networks as it represents one type of substitute for its services. In fact, the company already has a miniscule virtualization department. We estimate that it contributes only 1% to the company’s stock price. F5 Networks could pursue a strategy of purchasing a virtualization company. Leading virtualization company VMware (NYSE: VMW) is already a partner in solutions that provide data consolidation capabilities across long distances. While the firm is too large to buy for F5 Networks, there are smaller players that might be a better fit. This additional capability could be a new catalyst for the stock price.
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