What’s Happening With FFIV Stock?

F5 stock (NASDAQ: FFIV) was up 10% on Tuesday, October 29, after the company posted upbeat Q4 results and a better than anticipated guidance for 2025. It posted revenue of $747 million and adjusted earnings of $3.67 per share, compared to the consensus estimate of $730 million and $3.45, respectively. In this note, we discuss key takeaways from F5’s recent quarterly performance, its stock performance and valuation. Separately, check out why did SNAP stock rise 10%?

How Did F5 Fare In Q4?

F5’s revenue of $747 million in Q4 reflected a 5.6% y-o-y growth, led by a 19% jump in software sales. Looking at other segments, global services sales were up 2%, while systems revenue declined 3%. F5’s adjusted operating margin expanded by 50 bps y-o-y to 34.4% in Q4. Higher revenues and margin expansion resulted in a bottom line of $3.67 on an adjusted basis, reflecting a 5% y-o-y growth.

Looking forward, F5 expects its fiscal 2025 sales to rise between 4% and 5% and its adjusted earnings to rise between 5% and 7%. The company also announced an additional $1 billion in share repurchases.

What Does It Mean For FFIV Stock?

An upbeat quarter, better than anticipated earnings, and an increase in share repurchases, are all the ingredients that would make investors happy. F5 has transformed itself into a software focused company, which will bode well for it in the long term. That said, with a 10% gain recently, we think FFIV stock is now fully valued. We estimate F5’s valuation to be about $245 per share, close to its current market price of $240. At its current levels, FFIV stock is trading at a little under 17x its expected earnings of $14.37 in fiscal 2025. The 17x figure aligns with the stock’s average P/E ratio for the last three years.

FFIV stock has outperformed the broader markets, with 35% gains this year, vis-à-vis 22% growth for the S&P500 index. If we look at a slightly longer period, the changes in FFIV stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for FFIV stock were 39% in 2021, -41% in 2022, and 25% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While FFIV stock looks like it is fully priced, it is helpful to see how F5’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/30/2024
[2] Cumulative total returns since the end of 2016

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