NEW YORK ( TheStreet) -- Investors who are stuck in the idea that valuation doesn't matter are realizing that everyone once in a while it does, especially for tech companies with enormous growth expectations. On Friday, shares of F5 (FFIV - Get Report) took a brutal beating, falling almost 20% following for downgrades from several prominent analysts.Granted, these analysts are right for lowering expectations. Unfortunately, they're five months late. We saw these red flags in November and discussed them here.
These were glaring weaknesses that the Street should have picked up on. Yet, the stock continued to trade at a level that presumes growth would continue indefinitely. But it was more than that. Unlike many other tech companies that were dealing with weak IT spending, F5's challenge was twofold. Going in to 2013, not only did the company face tough growth challenges, but that growth needed to come in sufficient quantities to justify the valuation. While management will never admit that they operate on pressures imposed by the company's stock price, this is also hard to ignore. The Street loved this company too much. However, that wasn't the only warning that we issued. Again, on Feb. 7 following the company's fiscal first-quarter report I told investors to bail on the stock. Unfortunately, many remained committed to the idea that growth would continue despite soft margins. Today, analysts from Piper Jaffray, Citigroup (C), and Topeka Capital, no longer believe that the company can deliver the goods. Topeka Capital's Brian White said: Despite the biggest appliance refresh in four years, F5 is still struggling with product revenue and clearly a concern. We believe the Company has fallen victim to a tough macroeconomic environment and confusing trends around next generation networking technologies such as SDN that are causing IT managers to delay purchases.