F5 Networks, Inc. (FFIV) Goes in the Penalty Box

Bottom Line

For the first time in a while, F5 Networks, Inc. (NASDAQ:FFIV)’s revenue, EPS and return on equity (ROE) are starting to trend downward in a concerning way.  The project delays and lack of government spending can be looked at in two ways.  The bullish argument would be that the projects are delayed but will later be spent, and the government spending will come back eventually.  The bearish argument would be that tech spending overall is clearly declining and competition for F5’s offerings is heating-up.

I am in the middle of these two sides after F5’s most recent quarter.  Nothing in this quarter indicates a disturbing long-term trend.  At the same time, decreases in revenue, even if short-term, don’t lie.  That’s why I’m putting F5 stock in the penalty box until it reports another quarter.  This is not a dip that I’m jumping to buy.  I still own the stock from before the decline, but won’t be buying any additional.

Interestingly, even with all of its up and downs, F5 Networks, Inc. (NASDAQ:FFIV) stock has outperformed both Cisco and Citrix over the past four years (since the market crash).  I wouldn’t be surprised if this continues to be the case.  Hopefully for F5, this dip is temporary again.  But unlike the other dips, I’ll take a pass and wait to see how the third quarter plays out before I get back in.



Thanks for reading!  More updates to come as this story plays out.

The article F5 Networks Goes in the Penalty Box originally appeared on Fool.com and is written by Dave Zaegel.

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