F5 Networks, After Drop, Gets Analysts' Backing

BOSTON ( TheStreet) -- F5 Networks' ( FFIV) shares shredded investors' portfolios after falling by a fifth yesterday, even though the company missed analysts' revenue estimates by less than 1%.

That's the danger of investing in high-flying tech stocks -- today as it was a decade ago, during the first Nasdaq bull market.

Still, analysts and investors are saying now's the time to buy more shares in the maker of cloud-computing software, from Catharine Trebnick, senior research analyst with Avian Securities, to Credit Suisse's Paul Silverstein, Piper Jaffray's Troy Jensen and Mark Schultz, manager of the MTB Mid-Cap Growth Fund.

F5 Networks late Wednesday reported adjusted earnings of 88 cents a share, beating the 83-cent average estimate of analysts polled by Thomson Reuters. Revenue of $268.9 million, however, fell short of the consensus view of $270.6 million. F5 Networks offered revenue guidance for the fiscal second quarter that also came up shy of Wall Street's expectations.

Avian Securities' Trebnick said F5 Networks should be a core holding and that investors should buy on any pullback in the stock.

"We are bullish on F5 growth prospects with cloud-computing opportunities in telco and enterprise," Trebnick wrote in a research note Thursday. "We realize that the company must demonstrate sustained growth in order to continue to show they can beat estimates going forward, but having said that, we believe the company is on the right track."

Silverstein at Credit Suisse raised his outlook on the stock to "outperform" from "neutral," saying he sees no meaningful change in F5's earnings or revenue outlook. He and Piper Jaffray's Jensen said the selloff provides a compelling valuation for F5 Networks shares.

TheStreet Ratings has a "buy" rating on F5 Networks, with a price target of $188.93 as of Jan. 16, before the release of the company's latest financial results. The "buy" rating was "based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate." Among other analysts following F5, 17 say investors should buy shares, 15 have a "hold" rating on the stock, and two recommend that investors dump shares, according to Bloomberg.

Some investors already are acquiring shares. F5 opened at $111.68 and was up 3.4% in recent trading. The stock hit an all-time high of $145.76 on Jan. 13 before falling as low as $106.10 yesterday.

Despite the drop, believers in F5 Networks' growth story have seen their investment more than double over the past year. F5 Networks was among the best-performing S&P 500 stocks in 2010. The success has come on the back of F5's Application Delivery Controller (ADC) products, which help companies manage their computer network traffic more efficiently.

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