F5 (FFIV) Last Update 9/9/24
Related: MSFT ADBE ORCL SAP
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
F5
$195.25
Yours
Trefis Price
N/A
$219
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

F5 Company

VALUATION HIGHLIGHTS

  1. Services constitute 59% of the Trefis price estimate for F5's stock.
  2. Application Delivery Network constitutes 32% of the Trefis price estimate for F5's stock.

WHAT HAS CHANGED?

  1. F5 Stock Performance
FFIV stock has witnessed gains of 15% from levels of $175 in early January 2021 to around $200 in early September 2024, vs. an increase of about 45% for the S&P 500 over this period.

However, the increase in FFIV stock has been far from consistent. Returns for the stock were 39% in 2021, -41% in 2022, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that FFIV underperformed the S&P in 2022.

  1. Q3 2024 earnings
F5 Inc. delivered upbeat Q3 2024 (ending June 2024) results, with the company's EPS increasing to $3.36 from $3.21 in the prior-year quarter. However, F5's revenues declined 1% y-o-y to $695 million in Q3'24. The top line shrank due to a 6% fall in the products revenue, while its services segment saw a 3% growth.

BUSINESS SUMMARY

F5 Inc. is a leading provider of technology that optimizes the delivery of network-based applications and the security, performance, and availability of servers, data storage devices, and other network resources. F5's products collectively simplify the management of data center operations and delivery of services across diverse data center resources.

F5 Inc. pioneered load-balancing technology that distributes internet traffic evenly across multiple servers, making them look like a single device.

SOURCES OF VALUE

Application Delivery Network

Application delivery network solutions continue to be a fast-growing segment in the enterprise networking market. The need for enterprises to invest less in building and owning a new data center and to optimize the existing facilities has led to an increase in demand for application delivery products, which deliver the same. Moreover, the shift to cloud-based applications and storage has also driven up the demand for application delivery products.

Services

F5 continues to derive a significant portion of its revenues from service and maintenance contracts. Its high quality of service is usually a selling point for its products.

KEY TRENDS

Growth in enterprise Internet traffic

There is a growing adoption of advanced video communications in the enterprise segment. Web-based video conferencing and network management are expected to grow faster than average business video conferencing.

Shift to cloud-based services and storage

F5 is facing competition not only from new entrants in the ADC (Application Delivery Controller) market but also from native cloud-based service providers. Traditionally, ADC vendors have focused on helping customers manage applications in their own data centers. However, as more and more applications are now being deployed in Cloud data centers, ADC vendors are increasingly focused on evolving their support for applications on the cloud. Consequently, traditional load-balancing companies, such as F5 Inc., have to compete with the offerings of cloud vendors, such as Amazon. We can expect cloud-based load-balancers to command a larger percentage of the application delivery controller market in the future. This can hurt F5's revenue growth, too.

Security solutions are a key growth driver

With increasing network complexity, reducing security risk is an important criterion for enterprises. Over the years, data theft technology has become more sophisticated, and the global cybercrime market is currently sized at over $100 billion.