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F5 Networks stock gains 9% on lifted full-year outlook; Analysts remain cautious



© Reuters. F5 Networks (FFIV) stock gains after raising full-year outlook

(Updated – January 30, 2024 6:57 AM EST)

F5 Inc. (FFIV) reported its first-quarter results, surpassing the average analyst estimates.

The company achieved net revenue of $692.6 million, a decrease of 1.1% year-over-year, but higher than the expected $684.8 million. The adjusted earnings per share stood at $3.43, significantly higher than last year’s $2.47 and exceeding the forecast of $3.04.

In light of these results, F5 revised its fiscal year 2024 adjusted earnings per share outlook, predicting a growth of 6% to 8%, up from the previously estimated 5% to 7%. This revision is due to a lower expected tax rate for the fiscal year.

The company’s stock rose 9% in pre-market Tuesday trade.

For the second quarter of fiscal year 2024, F5 forecasts revenue in the range of $675 million to $695 million, with non-GAAP earnings projected between $2.79 and $2.91 per diluted share.

Analysts were looking for Q2 revenue of $674.3 million and adjusted EPS of $2.97.

“Our team delivered solid first quarter results, including revenue near the high end and earnings per share above the high end of our guidance ranges,” said François Locoh-Donou, F5’s President and CEO.

Morgan Stanley analysts raised the price target by $15 to $190 per share.

“Upside to FQ1 driven by pricing benefits rolling through services as well as some unexpected perpetual license election by service providers. Remain EW, as some signs of stability in enterprise spend more encouraging, but timing around reacceleration still uncertain,” analysts said.

On the other hand, Evercore ISI analysts ask – is this growth durable?

“While we think investors will struggle with the trajectory of s/w segment performance (perpetual vs. subscription) and their ability to sustain >30% EBIT margins.”

“The company appears on-track to do >$12.50 EPS in FY24 and likely close to $13.50-14 in FY25 – should they be able to execute to this organically and capital returns remain shareholder friendly we think the stock can keep working higher,” analysts said in a note.

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