Deutsche Bank Models 27% Downside In F5 Networks Shares

F5 Networks, Inc.FFIVVijay BhagavathF5 Networks' stock with a price target lowered from $100 to $90. Commentary from research within the Enterprise, Cloud, and Service Provider IT Channel signals weaker than expected demand for F5's Layer 4-7 appliance refresh that is aimed at mid to large enterprises and telcos in the U.S., parts of Western Europe, Japan and elsewhere, Bhagavath commented in his research report. In fact, the appliance refresh opportunity is now expected to see heightened competition from "pure play" providers in addition to "low cost" Open Source alternatives and competition from Hyperscale Cloud providers.

"These headwinds are meaningful detractors for FFIV's FY18+ Growth Story and to stock performance in our view, as expectations around Takeout, Product Refresh, Margin Accretion, etc are likely to deflate," the analyst said.

Heading into fiscal 2018, F5's Appliance revenues are now expected to decelerate which marks a reversal versus prior expectations for a 4-percent growth rate in fiscal 2017 and in the "1 percent range" next year, the analyst added. Meanwhile, the Street is calling for a mid-single digit growth rate, which implies downward revisions to consensus estimates could be forthcoming.

At time of publication, shares of F5 were down 4.32 percent at $118.38.

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