Skip to main content

F5 Falls as Goldman Is Only Wall Street Firm to Rate the Stock Sell

F5 was downgraded to sell at Goldman Sachs, the only Wall Street firm with such a rating on the network-systems provider.
  • Author:
  • Publish date:

Shares of F5 Networks  (FFIV)  dropped Tuesday after analysts at Goldman Sachs downgraded the stock to sell from neutral on concern that the network-systems' provider's software business could disappoint. 

With the downgrade, Goldman is now the only firm with a sell recommendation on the Seattle company, according to Bloomberg.

Goldman also lowered its price target to a Wall-Street-low $165 a share from $191. At last check F5 shares were off 3.9% at $178.21.

"F5’s software growth targets are optimistic in a market which is rapidly transitioning to cloud-based architectures where they have lower share,” Goldman Sachs analyst Rod Hall said. 

The firm says that while F5 has made acquisitions to boost its software growth, "we question how quickly those deals will contribute enough to revenue" to offset weakness elsewhere in the business, Hall said. 

Additionally, the bump the company received from the pandemic lockdown -- companies spent to ensure staff had remote access -- is less of a factor as the economy reopens. 

In April, analysts at Credit Suisse downgraded the company to neutral from outperform with a $207 price target ahead of its second-quarter-earnings report. 

The stock is down nearly 10% since that downgrade. 

While analysts at Credit Suisse remained bullish on F5's "relevance to hybrid cloud transitions," channel checks suggest a "slight slowdown" in IT-solutions demand from enterprises and lower-than-expected demand from the U.S. federal government in the first half.

Credit Suisse says F5's revenue growth might not accelerate after the second quarter, which could create a "mixed reaction" from investors due to the stock's current valuation.