F5's Strong Valuation Offers Limited Upside
NEW YORK (
) --
Cisco
(CSCO) - Get Report
rival
F5 Networks
(FFIV) - Get Report
, which hosted its annual analyst event on Tuesday, may not be suffering the same
as its competitor, but analysts are warning investors to approach the company with caution.
Shares of F5, which also competes with
Juniper
(JNPR) - Get Report
and
Citrix
(CTXS) - Get Report
, have risen more than 118% this year to top $116, boosted by strong sales of the firm's application delivery hardware.
This valuation, though, offers limited upside to investors, say analysts.
|
"We believe F5 has one of the best financial models in the tech industry driven by its value-added products, but shares are fully valued at current levels," explained Brian Marshall, an analyst at Gleacher & Company, in a note released on Wednesday. "We still recommend investors remain on the sidelines due to unfavorable risk/reward profile."
F5 unveiled new hardware aimed at service providers this week, and reiterated its first quarter and fiscal 2011 guidance at the analyst event. The company also explained that its total addressable market will grow from $4 billion in 2010 to $9 billion in 2014.
"The strategic position of F5 in the data center is undeniable," added Marshall. "Other than
VMware
(VMW) - Get Report
, we have difficulty trying to identify another enterprise infrastructure provider with as many secular tailwinds as F5 currently enjoys."
The analyst, however, rates F5's stock as neutral despite the company's success in tapping the boom in voice, video data traffic. Marshall, though, said that he could become more positive on F5 if the firm's fundamentals remain strong and shares dip below $90.
"We view F5's secular growth opportunity in the telco space as very compelling, though already reflected in the stock's valuation," added Simona Jankowski, an analyst at Goldman Sachs, in a note released on Wednesday. Jankowski, who has a sell rating on F5's shares, maintained her $85 12-month price target for the networking specialist.
Traditionally something of a
, F5 has even been touted as a possible acquisition target for
HP
(HPQ) - Get Report
on the strength of its application delivery technology, although this seems less likely after HP's acquisition of
3Com
.
F5 shares crept up 73 cents, or 0.63%, to $116.68 on Wednesday shortly after market open.
--Written by James Rogers in New York.
>To follow the writer on Twitter, go to
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.
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