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Seattle application security and delivery giant F5 will acquire Lilac Cloud, a small computer networking startup based in Silicon Valley. F5 made the announcement as part of its quarterly earnings report Tuesday. Its Q1 revenue grew 2% year-over-year to $700 million, while non-GAAP net income dropped to $2.47 per share, compared to $2.89 per share in the year-ago quarter. F5 stock was down slightly in after-hours trading.

• On January 24, F5 Networks releases earnings for Q1.
• Analysts expect F5 Networks will report earnings per share of $2.33.
• Go here to track F5 Networks stock price in real-time on Markets Insider.

On January 24, F5 Networks will report latest earnings.

16 analysts forecast earnings of $2.33 per share as opposed to earnings of $2.89 in the same quarter of the previous year.

Wall Street analysts are expecting sales to increase 1.98% compared to the prior year quarter. The company is expected to report $700.7 million.

For the fiscal year, analysts expect earnings per share of $11.43 compared to $10.19 per share in the previous year. On average, analysts expect revenues of $2.93 billion, compared to $ 2.70 billion last year.

This story was written by Markets Insider's RoboEddy, which automatically writes these stories based on data provided by our partners.

Cybersecurity stocks are down from their high-flying days in the post-pandemic world. Stocks from Palo Alto Networks (NASDAQ: PANW) to Datadog Inc. (NASDAQ: DDOG) and Paycom Software (NASDAQ: PAYC) are down 50% or more from those days, but the time to buy them might be at hand. Results from F5 Networks (NASDAQ: FFIV) suggest a bottom may begin to form soon, and this stock at least is trading at a value.

F5 Networks is trident at only 12X its earnings while others in this group, including blue chip Palo Alto Networks, are trading 44X to 88X its earnings. In this light, F5 Networks may be the best choice for investors, and it is already showing signs of bottoming.

F5 Networks Hits Bottom On Mixed Results And Outlook 

F5 networks didn’t have a bad quarter, but its results show the surge in post-COVID security spending has run its course. The company’s revenue of $700 is up almost 2.0% versus last year but was fully priced in by the market. Revenue was driven by a 5% increase in Global Services offset by a -1% decline in Products. Product sales were driven by a 3% increase in software offset by a 4% decline in systems. 

The good news is that margins did not contract as much as expected and left the bottom line in much better shape than forecast. The Q1 adjusted EPS of $2.47 is $0.14 ahead of the Marketbeat.com consensus and is coupled with a favorable outlook. The company is expecting to meet its 9% to 11% revenue growth goal and its forecast for double-digit EPS growth.

The only bad news is that Q2 EPS guidance is weak relative to the consensus estimates, but the market is shrugging that off. The takeaway appears to be stablility, which is as good as growth in a no-growth environment. 

“We continue to expect 9% to 11% revenue growth for the year, though the mix may look different than what we expected three months ago,” continued Locoh-Donou. “We remain committed to maintaining double-digit non-GAAP earnings growth this year and on an annual basis going forward. We will continue to evaluate our cost base and take further action as needed to achieve this goal.”

More Reports Due Out In February 

Datadog, Palo Alto Networks and Paycom all report in early to mid-February, and the expectations are high. However, the key takeaway from the consensus figures is that growth is slowing, which may weigh on share prices over the next 2 weeks. Assuming these companies can affirm a positive outlook for the year, they, too, may begin to bottom.

Now, these stocks are down -2% to -8% on the F5 news and not showing the same signs of support. 

Since the earnings release, many analysts have come out to lower their price targets for F5. The salient point here is the consensus of the 6 new price targets is above the current Marketbeat.com consensus figure. The consensus is down on a YOY, 3-month and 1-month basis but still offers more than 20% upside for investors and the analysts are still holding the stock.

The Technical Outlook: F5 Networks Is At A Bottom 

The weekly and daily charts agree F5 Networks is at the bottom. The question is whether this will be a point of full reversal or the stock will enter a trading range. It looks like a trading range is the most likely scenario. The targets for resistance are $150 and $158.50. This stock may trend higher if these levels can be broken, but analysts need to alter their tune. The next possible catalysts are the earnings reports from industry peers. 

F5 Networks FFIV reported mixed first-quarter fiscal 2023 results, wherein the top line missed but the bottom line surpassed the Zacks Consensus Estimates.

The Seattle-based company’s non-GAAP earnings of $2.47 per share beat the Zacks Consensus Estimate of $2.34. Although the bottom line declined 1.5% from the year-ago quarter’s $2.89 per share, the figure came in way higher than management’s guided range of $2.25-$2.37 per share.

During the reported quarter, F5 Networks witnessed a 2% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $700.4 million, which missed the Zacks Consensus Estimate of $700.6 million. The top line was in line with the mid-point of the guided range of $690-$710 million.

Top Line in Detail

Product revenues (48.6% of total revenues), which comprise Software and Systems sub-divisions, decreased 1% year on year to $341 million. Software sales jumped 3% year over year to $168 million, accounting for approximately 49.3% of the total Product revenues. However, System revenues slumped 4% to $173 million, making up the remaining 50.7% of the total Product revenues. This downside was due to the ongoing global chip shortage.

Global Service revenues (51.4% of total revenues) grew 5% to $359.8 million.

F5 Networks registered sales growth across the EMEA, witnessing a year-over-year increase of 13.6%. The company registered 0.2% and 6.6% decrease in sales growth from the Americas and APAC regions, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 57%, 26% and 16%, respectively.

Customer-wise, Enterprises, Service providers and Government represented 62%, 21% and 17% of product bookings, respectively.

Margins

GAAP and non-GAAP gross margins contracted 240 basis points (bps) and 260 bps to 77.9% and 80.4%, respectively.

GAAP and non-GAAP operating expenses went up 3.7% and 9.5%, respectively, to $454.2 million and $378 million. F5 Networks’ GAAP and non-GAAP operating margins shrunk 360 bps and 620 bps to 13% and 26.5%, respectively.

Balance Sheet & Cash Flow

F5 Networks exited the December-ended quarter with cash and short-term investments of $660 million compared with the previous quarter’s $884.6 million.

During the fiscal first quarter, the company generated $158 million of operating cash flow compared with the $154 million reported in the previous quarter. The operating cash flow remained under pressure due to strong multi-year subscription sales, which impacted the cash collection process.

F5 Networks repurchased shares worth $40 million during first-quarter fiscal 2023.

Guidance

F5 Networks projects non-GAAP revenues in the $690-$710 million (mid-point of $700 million) and non-GAAP earnings per share in the $2.36-$2.48 band (mid-point of $2.42) for second-quarter fiscal 2023.

For fiscal 2023, F5 Networks provided an estimate of 9-11% total revenue growth. The company expects global services sales to grow in mid-single digit.

F5 Networks anticipates non-GAAP earnings to grow in the low-to-mid teens.

Zacks Rank & Stocks to Consider

F5 Networks currently carries a Zacks Rank #4 (Sell). Shares of FFIV have slumped 35.3% in the past year.

Some top-ranked stocks from the broader Computer and Technology sector are Axcelis Technologies ACLS, Bandwidth BAND and Zscaler ZS. While Axcelis sports a Zacks Rank #1 (Strong Buy), Bandwidth and Zscaler carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axcelis’ fourth-quarter 2022 earnings has been revised 41 cents northward to $1.46 per share over the past seven days. For 2022, earnings estimates have improved by 8.5% to $5.21 per share over the past seven days.

ACLS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.2%. Shares of the company have risen 81.5% in the past year.

The Zacks Consensus Estimate for Bandwidth’s fourth-quarter 2022 earnings has been revised by a penny to 4 cents per share over the past 90 days. For 2022, earnings estimates have moved north by 25 cents to 37 cents per share in the past 90 days.

BAND's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 301.8%. Shares of the company have declined 59.6% in the past year.

The Zacks Consensus Estimate for Zscaler's second-quarter fiscal 2023 earnings has been revised 3 cents north to 29 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved north by a penny to $1.24 per share in the past 30 days.

ZS' earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 27.3%. Shares of the company have declined 45.8% in the past year.

To read this article on Zacks.com click here.

F5 Networks (FFIV) came out with quarterly earnings of $2.47 per share, beating the Zacks Consensus Estimate of $2.34 per share. This compares to earnings of $2.89 per share a year ago. These figures are adjusted for non-recurring items.

To read this article on Zacks.com click here.