Why This F5 Networks Analyst Is Turning Bearish

F5 Networks, Inc’s FFIV growth targets appear too optimistic, with the market “rapidly transitioning to cloud-based architectures,” where the company has a lower share, according to Goldman Sachs.

The F5 Networks Analyst: Rod Hall downgraded F5 Networks from Neutral to Sell and reduced the price target from $191 to $165.

The F5 Networks Takeaways: Although the economy is reopening, this presents risks to the company’s revenue momentum, which could result in earnings falling short of the consensus estimate, Hall said in the Tuesday downgrade note.

Consensus expectations have been reduced, but not “as much as we believe is appropriate for software growth this year,” the analyst said. 

“Given this and our view that F5 has benefited from remote access spending, we believe the stock is likely to underperform the rest of our coverage in the short term." 

To become more constructive, Goldman Sachs would like to see software growth reaccelerating to F5 Networks' target range, or for consensus expectations to fall back toward the Wall Street firm's forecast, he said. 

FFIV Price Action: Shares of F5 Networks had declined by 4.02% to $177.97 at the time of publication Tuesday.