F5 Losing Its Outside Support (FFIV)

F5 Networks is losing more of those old buyout hopes.  We noted at VSInvestor.com on October 4 that buyout rumors were driving the stock, but the problem is that it was approached more than a year ago when shares were far lower.  The valuations are excessive and shares were just at $110 and higher just earlier this week.  Now we have shares down 6% more this morning at $93.00 and the market cap is still right at $7.5 billion after a $19 point drop.  Analysts are using the latest gains to exit the stock.

F5 Networks had its ratings cut to Sell from Neutral at Goldman Sachs today . Earlier this week, F5 tumbled after its rating was cut to “Neutral” from “Buy” at Gleacher & Company and it has a price target of $115.00 per share.  The 52-week low is $38.68 and the high is $112.05.  Without an adjustment from ratings, earnings estimates are $2.44 EPS for FY SEPT-2010 and revenue estimates are $874.44 million; next year estimates are $3.07 EPS and $1.1 billion.  That gives a forward multiple of nearly 30-times earnings and almost 7-times revenues.

What F5 offers around the cloud play is an integrated Internet traffic management solution to improve the availability and performance of mission-critical web-based servers and applications; its software solutions manage, control and optimize Internet traffic and content.

If you look at the StockCharts.com chart, this represents a key area.  The 50-day moving average is $94.37, and if that fails and any more exodus comes then the 200-day moving average is all the way down at $71.81.

Unless something unknown is brewing, F5 stock still appears to have more risk than reward.

JON C.OGG