F5 Networks (FFIV) Stock Rating Downgraded at JMP Securities

F5 Networks (FFIV) stock was downgraded to "market perform" from "market outperform" at JMP Securities on Friday.
By Amanda Albright ,

NEW YORK (TheStreet) -- F5 Networks (FFIV) - Get Report stock was downgraded to "market perform" from "market outperform" at JMP Securities on Friday morning.  

There are limited catalysts for growth at the software company, which specializes in application delivery services, according to JMP Securities. 

"While we believe a hardware refresh cycle will provide some incremental revenue growth, we are concerned investors will discount for refresh-associated revenue growth as it is cyclical and hardware-centric," the firm said in a note.

F5 Network's refresh cycle in 2016 will not be a meaningful catalyst for F5 Networks until fiscal 2017, because new hardware products take about six months to gain traction, JMP Securities added.

Additionally, the migration to public cloud providers such as Amazon's (AMZN) Web Services platform and Microsoft's (MSFT) Azure platform could reduce the total market opportunity for F5 Networks.

F5 Networks stock was down by 5% to $100.99 in early-morning trading on Friday.

Separately, TheStreet Ratings team rates F5 NETWORKS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate F5 NETWORKS INC (FFIV) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • FFIV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.40, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, F5 NETWORKS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for F5 NETWORKS INC is currently very high, coming in at 85.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.35% is above that of the industry average.
  • F5 NETWORKS INC has improved earnings per share by 7.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, F5 NETWORKS INC increased its bottom line by earning $5.04 versus $4.09 in the prior year. This year, the market expects an improvement in earnings ($7.01 versus $5.04).
  • You can view the full analysis from the report here: FFIV

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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