Deutsche Bank’s Brian Modoff today reiterates a Buy rating on shares of F5 Networks (FFIV) while trimming his price target to $140 from $150 to account for lower estimates based on macroeconomic concerns.
Modoff cut his estimate for the June-ending fiscal Q3 to $351 million in revenue and $1.12 per share from $354.6 million and $1.14, cut next quarter’s estimate to $372 million and $1.18 from $382 million and $1.21, and cut next fiscal year’s estimate to $1.65 billion and $5.26 from $1.68 billion and $5.35.
According to Modoff, his conversations with IT shops indicate reluctance to spend, while at the same time, trends for F5′s own product sales are somewhat better than expected:
Basis for our estimates adjustment is our latest research, with IT decision makers and with the IT channel, suggesting near-term macro-driven weakness influencing large enterprise IT spending and product upgrades (bulge brackets, high technology, diversified services, etc); potentially impacting F5�s Q3 results and the 2H+ outlook.
Offsetting our near-term caution is positive data from our research suggesting above target trends in F5�s datacenter firewall and web application security business, solid growth prospects in telco (Traffic Steering and Diameter use cases), and a robust core ADC business that could see Viprion upgrades from the Romley server product cycle, and from Private Cloud rollouts, continued adoption of SaaS, etc.
We also note positive trends in the sales of value-add software modules such as Access Policy Manager, Application Security Module, etc. These modules run on the BIG-IP and Viprion platforms, and are among the basis for F5�s TAM expansion and growth story.
Shares of F5 today are down $9.71, or 8%, at $108.13.
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