Trader's Edge: F5 Networks
24-Jan-00 00:03 ET
[BRIEFING.COM - Robert Walberg] F5 Networks (FFIV) 129 13/16 is a leading player in the fast growing Internet traffic and content management (ITM) arena... Company's products are designed to automatically and intelligently manage Internet traffic and content to improve the availability and performance of mission-critical Internet servers and applications... Stock went public in June of last year; sports a market cap of $2.7 bln; and is up 13.9% year-to-date - the vast majority of which came on Friday when stock gained 8.7% on 1.6x average daily volume.
Trading Points:
Internet traffic and content management business, of which F5 is a recognized leader, is expected to post robust growth over the next several years.
F5 has posted revenue growth of 621% and 591% in the past two quarters...
Briefing.com, and the market, expecting another quarter of strong growth this quarter.
Speaking of this quarter, company due to report results on Tuesday...
Street expecting gain of $0.10... However, traders should note that company has handily beaten consensus estimates over past two quarters and we expect another positive surprise this reporting period.
Based on stock price, also chance company will announce 2-for-1 stock split along with earnings.
Friday's trading saw stock break out of bear channel...
More importantly, stock emerging from 3-month consolidation phase... Initial resistance is at 160 1/2 (52-wk high), with penetration establishing intermediate- to long-term price target of 200.
Though stock isn't cheap at nearly 100x trailing twelve month sales, pace of top-line growth suggests potential for at least moderate multiple expansion...
Considering estimated long-term growth rate of 50%, F5's estimated p/e multiples of 245x (FY00) and 143x (FY01) aren't outrageous - at least not by today's standards.
As a leader in the Net backbone industry, FFIV has surprisingly little following on the street, as only 4 analysts currently provide coverage (2 strong buys, 2 moderate buys)...
Leaves plenty of room for additional coverage - most of which should start of as favorable.
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