NEW DIRECTIONAL CALL PLAYS
F5 Networks, Inc. - FFIV - close: 125.19 change: +2.16
Stop Loss: 121.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 855 thousand
Entry on September -- at $---.--
Listed on September 10, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
Shares of FFIV did not enjoy the same rally the rest of the market did back in 2013. This year they're playing catch up with their stock up +35.4% versus the +8% rally in the S&P 500. Who is FFIV? According to a company press release:
"F5 provides solutions for an application world. F5 helps organizations seamlessly scale cloud, data center, and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. F5 solutions broaden the reach of IT through an open, extensible framework and a rich partner ecosystem of leading technology and data center orchestration vendors. This approach lets customers pursue the infrastructure model that best fits their needs over time. The world's largest businesses, service providers, government entities, and consumer brands rely on F5 to stay ahead of cloud, security, and mobility trends."
Just a few months ago FFIV strengthened their security services by buying Defense.net Inc. "a privately-held provider of cloud-based security services for protecting data centers and Internet applications from distributed denial-of-service (DDoS) attacks. The advanced technologies and operational experience shared between the two companies will expand F5's portfolio of security solutions for defense against Internet-based DDoS attacks on networks, data centers, and applications."
One reason the stock has been performing better this year is the earnings picture. Back in April when FFIV reported its Q2 numbers the company beat analysts expectations with revenues rising almost 20% from the year before. Management raised their EPS and revenue guidance.
They did it again in their last report. FFIV reported its Q3 results on July 23rd. Analysts were expecting a profit of $1.35 a share on revenues of $435 million. FFIV delivered a profit of $1.39 with revenues up +18.9% to $440.3 million. FFIV management raised their 2014 EPS and revenue estimates again.
John McAdam, F5 president and chief executive office, commented on their Q3 results. McAdam said,
"F5's solid gains in Q3 were driven by strong growth in product revenue, up 5 percent sequentially and 20 percent year-over-year... Growing demand for our expanding array of systems and application services was fueled by increasing awareness and uptake of our security offerings and the appeal of our Good, Better, Best pricing options. During the quarter, sales of Good, Better, Best bundles grew 49 percent from the prior quarter and contributed to a significant increase in sales of software products and of security solutions in particular. Sales were generally solid across all geographic regions and vertical market segments, with the exception of Japan."
These results sparked new upgrades from the analyst community. The Point & Figure chart is bullish and forecasting at $144 target.
The recent high is near $126.00. We are suggesting a trigger to buy calls at $126.25. We are listing the October calls. Investors may want to consider the 2015 January calls instead.
Trigger @ $126.25
- Suggested Positions -
Buy the OCT $130 call (FFIV141018C130) current ask $2.32
Option Format: symbol-year-month-day-call-strike