NEW DIRECTIONAL CALL PLAYS
F5 Networks - FFIV - close: $132.38 change: +1.67
Stop Loss: 129.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 965 thousand
Entry on December -- at $---.--
Listed on December 11, 2014
Time Frame: Exit PRIOR to earnings on January 21st, 2015
New Positions: Yes, see below
Why We Like It:
It has become a hostile world for corporations and their biggest weakness is online security. It feels like every day we hear about another company getting hacked. Last year the big story was Target (TGT). This year there were several companies, including Home Depot (HD). Just recently the current story is the terrible hacking incident at Sony, specifically their Sony movie studio. Fortunately for FFIV all of this plays to their strength as more corporations seek to beef up their cyber security.
According to company marketing, "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."
FFIV introduced a host of new products late last year and they have been knocking it out of the park with their "good, better, best" pricing strategy. Earnings this year have been consistently strong. Their report in January 2014 beat earnings on both the top and bottom line and FFIV raised guidance. The company did it again in April and July by beating Wall Street's estimates on both the top and bottom line and raising guidance.
Their most recent earnings report was October 29th, which was the company's fiscal year 2014 Q4 results. GAAP earnings came in at $1.26 a share. That's up 18% sequentially and up +23% from a year ago. Non-GAAP net income was $1.57 a share versus $1.26 a year ago. Their quarterly revenues rose +6% sequentially and +17.8% year over year to $465.3 million. Their fiscal year 2014 saw total revenues up +17% to $1.73 billion.
John McAdam, FFIV's president and chief executive officer, commented on their results saying,
"The fourth quarter of fiscal 2014 was a solid finish to a year characterized by positive customer and partner response to our Synthesis architecture, the array of new products we rolled out in fiscal 2013, our Good Better Best pricing strategy, and the enhanced capabilities of our BIG-IQ management platform... During the quarter, product revenue grew 20 percent from the fourth quarter of 2013, driven by strong sequential growth of Enterprise sales in the Americas and solid year-over-year growth in EMEA and APAC. Contributing to that growth, rising concern over the increasing number and variety of security threats helped stimulate demand for our security solutions and drive sales of our Better and Best software bundles, which include our most popular security products. This quarter, we will expand our portfolio of security offerings with the launch of our WebSafe and MobileSafe anti-malware solutions, available as software modules on TMOS, and Defense.Net, cloud-based DDoS protection that complements our on-premise DDoS solution."
FFIV management issued guidance that was in-line with Wall Street who had finally raised their estimates on the company. Speaking of Wall Street, analysts are bullish on the stock. FFIV has seen several price target upgrades in recent months with numbers like $136, $140, $150, and $151 a share. The point & figure chart is even more bullish with a long-term target of $182.00.
Investors have been consistently buying the dips and FFIV has a bullish trend of higher lows. Today shares are consolidating sideways beneath short-term resistance in the $133.50-133.75 area. Tonight we are suggesting a trigger to buy calls at $133.80.
Earnings are expected on January 21, 2015, so we'll plan on exiting ahead of the report. I don't see any February options available so we'll use the normal January calls that expire on the 17th.
Trigger @ $133.80
- Suggested Positions -
Buy the Jan $135 CALL (FFIV150117C135) current ask $3.25
Option Format: symbol-year-month-day-call-strike