In January 2017, integrated internet traffic management solution provider F5 Networks, Inc (NASDAQ: FFIV) reported fiscal 2017 first-quarter earnings of $94.22 million, or $1.44 per share, on revenues of $515.96 million. The revenues were higher on a y-o-y basis but lower than analysts’ expectations. Still, the market pushed the share price upwards on the basis of 1Q17 earnings that beat analysts’ estimates. In fact, the stock broke the level of 144, which acted as a strong resistance for the past three months, and recorded a new 12-month high of 149.50 last week. On the basis of the details provided below, we anticipate the share price, which ended at $146.52 yesterday, to remain in an uptrend.
To secure, optimize, and monetize networks of companies, F5 Networks has introduced a range of new 5G- and IoT-ready solutions. The company has also expressed its interest to collaborate with a range of service providers to exhibit the manner in which its technology can assist in the adoption of the latest trends such as IoT, multi-cloud deployment, and 5G. The product refresh is expected to boost the growth of F5 Networks in the quarters to come.
While issuing the first-quarter results, the Seattle-based company issued upbeat guidance for the second quarter. F5 Networks stated that it anticipates revenues in the range of $518 million to $528 million. The Zacks analysts’ estimate currently stands at $523 million. The non-GAAP earnings are expected to be between $1.95 per share and $1.98 per share. The Q2 earnings outlook of the company is higher than the Zacks estimate of $1.52 per share.
In two of the past four quarters, the company reported a positive earnings surprise. The average positive earnings surprise was 1.57%. Furthermore, F5 Networks has long-term earnings per share growth rate of 11.86%.
On the basis of the strong growth prospects, analysts at Zacks investment research upgraded the stock to a “buy” rating, from the prior “hold” rating. Analysts have also given a target price of $161 for the content management solution provider.
The completion of the corrective wave (a-b-c) followed by a pullback (grey colored circle) indicates a high probability of an uptrend in the stock of F5 Networks. The MACD indicator’s mainline is above the signal line. This indicates that an uptrend is about to begin. The positive reading of the histogram also confirms an increasing momentum. So, the risk to reward ratio favors a long trade.
Ideally, a call option would be the most suitable contract to trade under the current circumstances. It would also benefit a trader if the contract is active for a period of one week. The contract should be purchased only if the stock trades near $146 in the equity market.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
