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Morningstar’s Analysis

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F5’s Strong Software Growth Bolstered by Resilient Systems Demand; Raising FVE to $220

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

We are raising our fair value estimate of narrow-moat F5 Networks to $220 per share from $200 after its fourth-quarter results provide us with more confidence in F5’s growth trajectory and margin expansion opportunity. Year-over-year revenue growth came in slightly higher than our expectations while adjusted earnings easily surpassed our anticipations. We believe F5 is solidly positioned to capitalize on organizations increasingly becoming reliant on applications to service internal and customer-facing needs, both in the delivery and security of applications. Additionally, we expect F5’s software push to continue gaining momentum, which we believe will expand F5’s margin profile and provide investors with better visibility. Nonetheless, we view shares as fairly valued.

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Company Profile

Business Description

F5 is a market leader in the application delivery controller market. The company sells products for networking traffic, security, and policy management. Its products ensure applications are safely routed in efficient manners within on-premises data centers and across cloud environments. More than half of its revenue is based on providing services, and its three customer verticals are enterprises, service providers, and government entities. The Seattle-based firm was incorporated in 1996 and generates sales globally.

801 5th Avenue
Seattle, WA, 98104
T +1 206 272-5555
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Sep 30, 2021
Fiscal Year End Sep 30, 2022
Stock Type Slow Growth
Employees 6,461