BofA Upgrades F5 Networks, Projects Doubling Of Addressable Market

F5 Networks, Inc’s FFIV transition from legacy appliances to new-age software and cloud-based solutions will increase its total addressable market from $14 billion currently to $28 billion by 2023, according to BofA Securities.

The F5 Networks Analyst: Tal Liani upgraded F5 Networks from Underperform to Neutral and raised the price target from $124 to $180.

The F5 Networks Thesis: The transition to an application services company bodes well for the company, given the “opportunity with modern applications and the resulting software growth,” Liani said in the upgrade note.

Although the transition means significant pressure on legacy pricing, which accounts for 64% of product revenues, there will be a massive expansion in F5's total addressable market, the analyst said. 

A 36% compounded annual growth rate in container and cloud-based applications will expand the company’s modern ADC total addressable market from $3.5 billion to $7.6 billion, while a 21% compounded annual growth rate in application security will expand the total addressable market from $8.3 billion to $14.8 billion, Liani said.

F5's plans for an application performance monitoring solution represent an opportunity of another $3.1 billion, the analyst said. 

“These are significant opportunities compared to the traditional $2bn ADC market.” 

FFIV Price Action: Shares of F5 Networks were down 0.5% at $164.02 at last check Wednesday.