| Stock (Symbol) | Stock Price | |
F5 Networks (FFIV) |
$87 |
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| Data is as of | Expected to Report | Sector |
August 5, 2011 |
Oct 25 |
Technology |
| Sharek’s Take | ||
 Today I will purchase F5 Networks (FFIV) for the Growth Portfolio. F5 is the company you call to set up your company’s cloud computing. For example, say you have software on a cloud from VMware (VMW) and rent storage space from Rackspace (RAX). F5 Networks gets all this stuff working together, kinda like Cisco (CSCO) connected your PCs running Microsoft (MSFT) software got connected to EMC (EMC) storage units in the 1990’s.FFIV is my favorite cloud stock because the P/E is low and the profits keep coming in at record highs on a consecutive basis. The Dow dropped 500 points yesterday and I want to pick up one of the market’s top stocks while its down. |
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| One-Year Chart | ||
 The one-year chart shows FFIV just broke support to the downside. So that could mean the stock’s going lower.I last reviewed FFIV in my June newsletter when the P/E was 30. Now the P/E is 20. I feel this is a time to buy. Profit growth has been solid the past four quarters, but the Estimates aren’t quite so robust. FFIV has beaten the stree for at least the past five quarters, and could do so again. |
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| Earnings Table | ||
 Profit growth clocked in at 47% last quarter, higher than the 38% estimate. Note that estimate was 38% and now next quarter’s estimate is 25%, so FFIV could be slowing a bit. Revenue growth was 26% last quarter. The best thing about FFIV is profits have been record highs for the last eight quarters — 50 cents, 52 cents, 56 cents, 66 cents, 79 cents, 88 cents, 88 cents, 97 cents.FFIV beat by 6 cents last quarter and that looks like a trend that started before I started following this company.
Annual Profit Estimates are all in green, but 2011/2012 estimates increased only slightly. 2013 estimates increased more. Looking ahead to the next four quarters, profits look to grow 19%. Next quarter’s estimate increased 2 cents, but the 2QtrsOutEst and 3QtrsOutEst stayed the same. |
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| Fair Value | ||
 I’m taking my Fair Value P/E down from 35 last quarter to 30 this quarter because (1) the stock just broke out to the downside (2) growth might be slowing some (3) this stock didn’t do well the last time the economy slowed. Still, upside is solid and I need to stay focused on accumulating the best publicly traded companies. |
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| Ten-Year Chart | ||
 There are recession fears right now, and back in 2008/2009 this stock didn’t perform well even though profits were growing (revenue growth was 0% in 2009). During those times the stock was bottoming around $20 a share. That’s 12 to 14 times earnings. Recessions can hurt the cloud industry, but I do believe the cloud movement is stronger now than it was in 2008/2009. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
15 of 20 |
I really like this company — a lot. I feel we need to take this market correction and turn it into a positive. We do that buy purchasing top companies when they are down. Upside to Fair Value is solid and cloud computing will be one of the fastest growing industries during the next three to five years. On the other hand, FFIV just broke out to the downside, and this company isn’t economically resilient.I’m starting FFIV off as the 15th best stock in the 20 stock Growth Portfolio Power Rankings. I’m not putting it in the Aggressive Growth Portfolio at this time. | |
Aggressive Growth Portfolio
N/A |
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