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Why F5 Networks Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of network gear maker F5 Networks (Nasdaq: FFIV  ) plunged 12% today after its quarterly results and outlook missed Wall Street expectations.

So what: F5's wide fourth-quarter miss -- adjusted EPS of $1.12 versus the consensus of $1.19 -- and downbeat guidance for the current quarter reinforce concerns over its vulnerability to the soft global economy. Like rival network equipment maker Juniper Networks (NYSE: JNPR  ) , F5 continues to be seriously hurt by weak spending from big telecom customers, giving investors little hope for a near-term turnaround.

Now what: Management now sees first-quarter adjusted EPS of $1.14-$1.16 on revenue of $363 million-$370 million, well below the consensus of $1.20 and $373.5 million, respectively. "While we are excited about these new products and their potential to drive revenue growth, current macroeconomic conditions and our expectation of normal Q1 seasonality have tempered our outlook for the near term," cautioned CEO John McAdam. Of course, with the stock now off about 40% from its 52-week highs and trading at a forward P/E of 15, now might be a good time to buy into F5's still-attractive long-term prospects.

Interested in more info on F5 Networks? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool owns shares of F5 Networks. Motley Fool newsletter services recommend F5 Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On October 26, 2012, at 9:43 AM, jargonific wrote:

    I expected F5 to do what it's done, but it's low. Could it be heading even lower than 83? Maybe down to the 70s or even 60s? That would be a good buy.

    It's frustrating to have these companies ride the up/down/up/down rails for years, then suddenly take off. But have these steady profit makers risen to the point where it's an edge of the universe kind of situation? Could the co. grow its stock beyond the 100's toward the 200s? In other words, is it all down from here or more rail riding?

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FFIV $130.99 Up +11.45 +9.58%
F5 Networks CAPS Rating: ***