A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is F5 Networks Inc. FFIV. Though there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
F5 Networks’ share price movement has been quite favorable. Its shares have returned 29.6% on a year-to-date basis compared with 18.8% increase recorded by the industry to which it belongs.
Gaining Market Share With Continuous Product Enhancement
F5 Networks, which provides products and services to manage Internet traffic worldwide, is uniquely positioned to benefit from the growth prospects of the application-networking market as enterprises cope with the rapidly increasing capacity and security demands of next-generation applications and architectures. Notably, the company enjoys a strong foothold in the Layer 4-7 content switching market.
Additionally, the company is also taking steps to address the rising need of multi-cloud environment and better scaling of applications in an era where organizations are taking up digital transformation at an accelerated pace.
To meet the requirement of the “per application based cloud decision” of companies, F5 Networks came up with per application VE solutions in the first quarter of fiscal 2018. These offerings are meant to support web-application firewall and management of traffic. The benefits from these moves are likely to positively impact F5 Networks’ near-term results.
F5 Networks is also looking to grab opportunities in the security market as it expects this to help increase its addressable market and revenue growth prospects. Moreover, a new product cycle and better execution will increase revenues and strengthen its market leadership.
Acquisitions and Partnerships Aid Growth
F5 Networks has acquired as many as nine businesses over the years, enhancing its security capabilities and increasing its market share. The acquisitions have helped the company build an integrated security solution platform that provides continuous detection, prevention and remediation of security threats without increasing administrative costs.
The buyouts have not only expanded F5 Networks’ product offerings but also brought in additional revenues. We believe the acquisitions will help it cope with the rapidly evolving Internet security market.
Apart from this, the company also entered into a number of partnerships with companies like Microsoft Corporation MSFT, Oracle Corporation ORCL, Cisco Systems Inc. CSCO, VMware, Inc., and HP Inc. to provide integrated application services for their Software Defined Networking (SDN) offerings.
Further, the company also partnered with Amazon AWS, Microsoft Azure, VMware vCloud Air, Cisco ACI and many others to provide cloud-based application services and solutions.
These alliances have increased access to new technology, helped innovative product development, beef up F5 networks’ cyber security suite, facilitated joint sales and marketing programs and improve its competitive dynamics.
To Conclude
We believe the company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. It has delivered positive earnings surprise in the last four quarters, with an average positive surprise of approximately 6%.
Also, given its long-term earnings per share growth rate of 9.3% and VGM Score of A, we believe that the stock still has much upside potential.
F5 Networks currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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