F5 Analysts Acknowledge Q4 Beat, But Express Concerns Over Software Slowdown

Needham analyst Alex Henderson maintained F5, Inc FFIV with a Buy and cut the price target from $303 to $200.

F5 is usually one of the first companies in Henderson's coverage to report, and the 4QF22 print stumbled out of the gate. 

While Revenue and EPS beat, the mix was not good. Software slowed sharply to just 13% versus his forecast of 29%, and improved availability of Supply allowed the Systems business to ship more products. 

F5 said that eroded conditions impacted Software closure rates and resulted in new business deal pushouts even as renewal contracts remained strong. 

F5 offered Revenue guidance of 9%-11% growth for FY23 and double-digit EPS growth, but with a heavy back-half weighting pushing his estimates higher, even as the mix is less favorable. 

While Henderson edged up his Revenue and EPS estimates, he cut his target on the fragility evidenced in F5's new Software business. 

Credit Suisse analyst Sami Badri maintained F5 with a Neutral and raised the price target from $169 to $173. Overall, the guidance above expectations is positive. The software growth slowdown and the macro picture were concerns. 

Badri continued identifying FFIV as a critical network vendor in the enterprise transition to multi-cloud, boasting technologically differentiated technology. Still, He remained reserved on supply chain dynamics impacting sales and gross margins, with management reiterating F1H23 as the Systems revenue bottom. 

RBC Capital analyst Matthew Hedberg maintained F5 with a Sector Perform and lowered the price target from $175 to $160 on peer multiple compression.

F5 delivered revenue and EPS above the high-end guidance, but the mix was less favorable, with Systems performing better than expected. At the same time, Software saw headwinds from long sales cycles and project delays primarily internationally, a trend reflected in guidance which also implies that this trend spreads to the Americas. 

While FY23 guidance was better than expected, much of this was due to desired Systems strength, while Software growth likely decelerates and creates a problematic 2H implied ramp. 

Barclays analyst Tim Long maintained F5 with an Overweight and lowered the price target from $205 to $180.

Piper Sandler analyst James Fish maintains F5 with a Neutral and lowers the price target from $173 to $164.

Price Action: FFIV shares traded lower by 7.63% at $141.76 on the last check Wednesday.