F5 Networks Sinks 7.5% As 2Q Sales Outlook Disappoints

Shares of F5 Networks plummeted 7.5% in Tuesday’s extended trading session after the application services company provided a lower-than-expected 2Q revenue outlook. Meanwhile, the company reported better-than-expected 1Q results.

F5 Networks’ (FFIV) 1Q earnings of $2.59 per share grew 1.6% year-over-year and topped the Street estimates of $2.46 per share. The company’s revenues of $626 million rose 10% year-over-year and exceeded analysts’ expectations of about $624 million.

F5’s CEO François Locoh-Donou said, “Our investments over the last several years have fueled innovation, enhancing our strategic position with customers at a time when they are experiencing explosive application growth, and contributing to our 10% revenue growth in the first quarter.”

First-quarter revenue was driven by 70% growth in software sales, 5% growth in systems revenue and 1% growth in global services revenue.

As for 2Q, F5 Networks expects earnings in the range of $2.32-$2.44 per share compared to analysts’ expectations of $2.41 per share. However, F5 Networks’ 2Q revenue guidance of $625-645 million came in below the analysts’ forecast of about $621.66 million. (See FFIV stock analysis on TipRanks).

On Jan. 25, Cowen & Co. analyst Paul Silverstein raised the stock’s price target to $255 (22.3% upside potential) from $223 and maintained a Buy rating. The analyst believes that F5 Networks’ positive operating leverage should drive double-digit earnings growth over the next several years.

Overall, the Street has a cautiously optimistic outlook on the stock with a Moderate Buy analyst consensus based on 7 Buys and 6 Holds. The average analyst price target of $206.09 implies downside potential of about 1.2% to current levels. That’s after shares gained 53.6% over the past year.