Here's Why F5 (FFIV) is a Strong Contender for Portfolio Pick

F5 Networks To Buy Edge-As-A-Service Specialist Volterra

F5 Networks is buying startup Volterra for about $500 million for its distributed cloud services expertise. The deal will strengthen F5’s leadership position in enterprise application security and delivery, according to the company.

Application delivery specialist F5 Networks revealed its plans to acquire Volterra, a four-year old startup with an edge-as-a-service platform, for about $500 million.

The definitive agreement, announced Thursday afternoon, will involve F5 acquiring all issued and outstanding shares of privately held Volterra for approximately $440 million in cash and approximately $60 million in deferred consideration and assumed unvested incentive compensation to founders and employees, according to the two companies.

The deal will strengthen F5’s leadership position in enterprise application security and delivery. Together with the Volterra platform, F5 will be building a secure, app-driven edge platform -- Edge 2.0 -- with “unlimited scale” for enterprises and service providers, F5 said in a statement.

[Related: F5 Networks’ NGINX Portfolio Won’t Slow Down ‘Modern’ App Developers]

“Current edge solutions are simply inadequate for today’s enterprise customers. It’s time to break out of closed edge systems that only perpetuate the pain of building, running, and securing apps,” said François Locoh-Donou, president and CEO of F5 in a statement. “With Volterra, we advance our Adaptive Applications vision with an Edge 2.0 platform that solves the complex multi-cloud reality enterprise customers confront.”

Founded in Santa Clara, Calif., Volterra owns a platform that lets enterprises build, deploy, secure and operate applications and data in a uniform fashion across all public and private clouds and edge compute environments.

“The need to deliver rich digital experiences has meant that more and more of our customers are asking for expanded security and reliability features that are seamlessly integrated across their clouds and edge deployments,” Ankur Singla, Volterra‘s founder and CEO said in a blog post on the announcement. “As part of F5, we will have access to industry-leading app security capabilities to augment our unique SaaS-based networking, security and app management platform. We also get immediate access to a top-tier go-to-market team that has the deep industry experience in the app delivery and security market.”

Prior to starting Volterra, Singla founded and let software-defined networking company Contrail, which was purchased by Juniper in 2012 for $176 million.

As a result of the deal, F5 is expanding its total revenue growth expectations for its fiscal years 2021 and 2022. F5 is also repeating its commitment to $1 billion in share repurchases in the next two years, including a $500 million accelerated share repurchase in fiscal year 2021.

Here's Why F5 (FFIV) is a Strong Contender for Portfolio Pick

F5's FFIV shares jumped 21.2% post fourth-quarter fiscal 2023 earnings release, buoyed by strong performance. The surge showcases investors' trust in F5's solid finances and its strategic position in application delivery, networking and security solutions.

FFIV's earnings has outpaced estimates in each of the trailing four quarters, delivering an average surprise of 7.76%. This indicates an impressive track record of exceeding earnings estimates. Moreover, the company has a long-term earnings growth expectation of 5.4%.

The stock carries a Zacks Rank #2 (Buy) and has a Growth Score of B at present. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or #2 and a Growth Score of A or B offer solid investment opportunities.

With healthy fundamentals, the stock appears to be a solid investment option at the moment.

F5, Inc. price-consensus-chart | F5, Inc. Quote

F5’s stronger-than-expected fourth-quarter fiscal 2023 results have boosted investors’ confidence. F5 Networks stands out to benefit from the booming application networking market. With a strong hold in Layer 4-7 content switching and a solid position in data centers, the company is poised to expand market share, especially given the increasing demands for capacity and security in next-gen applications.

F5 is one of the major players in the application delivery controller (ADC) market, offering vital products for data center consolidation, virtualization and cloud services. Additionally, F5 has gained significant market share due to Cisco's shift away from the core ADC market. It is also a major developer and provider of software-defined application services, ensuring secure, speedy and accessible applications across IP networks on any device and at any time.

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FFIV collaborated with industry leaders, including Microsoft, Oracle, VMware, Cisco Systems and HP, to offer integrated application services for their Software Defined Networking offerings. It has also partnered with Amazon Web Services, Microsoft Azure, VMware vCloud Air, Cisco ACI and others for cloud-based application services. These partnerships increase access to new tech, aid product innovation, strengthen F5's cybersecurity suite, support joint sales and marketing efforts, and enhance its competitive edge.

The company is altering its business model by focusing on subscription-based services, which generate steady revenues and increase profits. The company has also made cost-saving moves like reducing staff, trimming facility space and cutting travel. These initiatives are aimed at lowering operating expenses and improving margins in the short run. Moreover, F5 boasts a strong balance sheet, ample liquidity and reduced debt, making it lucrative to investors.

Logitech LOGI, carrying a Zacks Rank #2 at present, is capitalizing on the surge of hybrid work patterns, which are expected to increase the need for its video collaboration tools, keyboards, combos and pointing devices. The thriving cloud-based video conferencing services remain a primary driving force behind this. You can see the complete list of today’s Zacks #1 Rank stocks here.

The growing adoption of new mobile platforms in both mature and emerging markets is driving Logitech's peripherals and accessories demand. Additionally, the company has been able to leverage its software and go-to-market capabilities to increase its market share.

The consensus mark for fiscal 2024 earnings has moved north 11 cents to $3.43 per share over the past 60 days, indicating a 6.52% increase from the fiscal 2023 level. LOGI has a Growth Score of A.

NVIDIA Corporation NVDA, carrying a Zacks Rank #2 at present, is reaping the rewards of increased investments in generative AI. The surge in generative AI technology is poised to create substantial demand for its next-gen high-performance computing chips. With rising investments in AI across the data center sector, NVDA anticipates its fourth-quarter fiscal 2024 revenues to soar to $20 billion from $6.05 billion in the previous year’s quarter.

NVIDIA maintains a dominant position in the AI chip market, with its GPUs already integrated into AI models. This expansion of NVDA’s reach is extending into previously untapped sectors, such as automotive, healthcare and manufacturing. Collaborations with Mercedes-Benz and Audi are poised to further bolster NVIDIA's presence in autonomous vehicles and other automotive electronics domains.

The consensus mark for fiscal 2024 earnings has been revised upward by 12 cents to $12.29 per share over the past 30 days, indicating a whopping 268% increase from fiscal 2023. The stock has a Growth Score of A and has a long-term earnings growth expectation of 13.5%.

CrowdStrike CRWD carries a Zacks Rank #2 and has a Growth Score of A. CRWD is capitalizing on heightened demand for cyber-security solutions, driven by numerous data breaches and the growing necessity for security and networking products amid the rise of hybrid work practices.

Ongoing digital transformations and the migration to cloud services within organizations serve as pivotal factors driving growth. The company's robust portfolio, including the Falcon platform's 10 cloud modules, fortifies its competitive advantage and attracts new users. Furthermore, strategic acquisitions like Bionic and Reposify are anticipated to propel further growth.

The Zacks Consensus Estimate for CrowdStrike’s fiscal 2024 earnings has moved north 12 cents in the past 30 days to $2.94 per share, indicating growth of 90.9% on a year-over-year basis. The long-term expected earnings growth rate for CRWD is pegged at 36.1%.

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