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F5 Networks: A Low Risk- High Reward Play Currently Trading At An Inexpensive 10% FCF Yield

Published Wed, 09 Oct 2019 10:14:53 -0400 on Seeking Alpha

F5 Networks (FFIV) has been working towards growing the software in its business to further growth. In line with the company’s strategy, F5 acquired NGNIX. While an expensive acquisition, we think NGNIX is transformational for F5’s business and is likely to help F5 break away from the image of a traditional IT solutions provider. The resulting growth could lead to a 40%+ return from the F5 stock.
Company description
F5 Networks operates in the application services market, with a focus on multi-cloud environments. The company’s focus on layer 4-7 services helps organizations achieve certainty in the delivery of an organization’s portfolio of services. The services considered here are traffic management, integrity and security analysis.
The attractiveness of F5’s end market has been growing with the advent of multi-cloud environments and the consequent need to oversee an increasing volume of traffic. Research suggests that the application delivery network market could cross $12 billion by 2023 from $6 billion currently.
While F5 has historically sold hardware and software, the company has been pushing to move towards a software-oriented business.

Source: Company filings, Management commentary, Author estimates
To further its software aspirations, F5 acquired NGNIX in March 2019.

Source: Company Press Release
The NGNIX acquisition
NGNIX is an open-source provider of application delivery. In addition to the obvious logic of F5... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AKAMAI TECH 90.99   35.7 2.55 0.00 0.00


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