Is This the Right Time to Buy F5 Networks (FFIV) Stock?

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Shares of F5 Networks (FFIV) hit a new 52-week high of $127.82 on Sep 18, eventually closing at $127.64. The closing share price represents a one-year return of 37.1% and a year-to-date return of 43.6%.

The price appreciation can also be attributed to F5 Networks’ upcoming product launches and growing demand for its security solutions. The company’s product refreshes are expected to boost revenues, going forward. Moreover, these initiatives are expected to expand its total addressable market (TAM) and result in client wins.

Recently, the company unveiled the latest Synthesis of Software Defined Application Services (:SDAS) for its flagship Big-IP solutions. SDAS is a networking approach, which helps to enable real-time, event-driven changes that meet the growing demand for data center solutions across the enterprise sector. Another important factor for choosing SDAS technology is that it is applicable for both private and public cloud infrastructures.

Further, F5 Networks entered into a partnership with VMware, Inc. (VMW) to provide cloud-based security services. F5 Networks will combine its BIG-IP application services with VMware vCloud Hybrid Service, which provides private cloud-based services to make the cloud-computing environment more secure, simple, flexible and efficient.

F5 Networks has also witnessed positive estimate revisions over the past 60 days with 5 upward revisions and no downward revision for the current quarter. The positive revisions led to a 7% rise in the Zacks Consensus Estimate to $1.22 per share for the fourth quarter of fiscal 2014.

Also, F5 Networks provided encouraging fourth-quarter earnings guidance in the last earnings call. For the fourth quarter of fiscal 2014, the company expects non-GAAP earnings per share (excluding stock-based compensation expenses) in the range of $1.46 to $1.49, well above the Zacks Consensus Estimate of $1.22 per share.

As things stand now, we believe that better execution and focus on enterprise and service providers will place F5 Networks well in the application delivery controller market. Nevertheless, a volatile spending atmosphere and competition from Juniper Networks (JNPR) and Cisco Systems, Inc. (CSCO) remain the concerns.

Currently, F5 Networks has a Zacks Rank #3 (Hold).

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