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Technology Stocks : F5 Networks, Inc. (FFIV)
FFIV 238.28-0.8%Nov 26 3:59 PM EST
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To: James Calladine who wrote (956)5/13/2000 5:11:00 PM
From: Czechsinthemail  Read Replies (2) of 1801
 
``Sales growth momentum and strong margins have enabled F5 to sustain profitability despite a continuing ramp-up in infrastructure to support our growth,'' added Mr. Hussey. ``We expect that F5 will deliver sequential quarterly sales growth in the low to mid teens, and continue to post profits and positive cash flow in the second half of fiscal 2000.''

If we accept that low teens is 13%, then compounded this works out to 63% or so annually.

Two points:

First, FFIV's guidance on sales growth has been very conservative. I believe their prior guidance on sequential quarterly sales growth was 10%. Since the most recent quarter's sales growth was more than twice that, many expected the company should predict sales growth considerably higher. They may well realize sales growth that is well above the estimates, which provides significant opportunity for upside surprises. More importantly, it means they are not very likely to miss their sales growth targets.

Second, you should not underestimate profits while continuing a substantial investment in infrastructure. A lot of that infrastructure spending will be going into sales which over time will substantially strengthen sales growth.

While F5's stock price may have gotten way ahead of itself (along with many other tech stocks), at current levels you aren't paying much for a profitable and rapidly growing company. Abundant disillusionment and pessimistic forecasts are already priced into the stock, so there is much more upside than downside potential from here.
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