F5 Closes $440M Cash Acquisition Of Volterra


F5 Networks announced the completion of its acquisition of Volterra on Jan. 25. Earlier this month, the application services company agreed to buy Volterra for $440 million in cash and another $60 million in deferred consideration.

The company’s F5+Volterra Edge 2.0 is an enterprise application security platform that aims to address security challenges found in current edge solutions built on content delivery networks.

François Locoh-Donou, CEO of F5 (FFIV) said, “I am incredibly excited to welcome Volterra to the F5 family and get to work bringing Edge 2.0—a key part of our Adaptive Applications vision—to customers. Joining forces, we will deliver the enterprise-grade features, including world-class security and scale, that have been missing from the edge until now.”

Shares of F5 Networks were up by 1.4% and closed at $207.25 on Jan. 25. The completion of the deal comes as the application services company is scheduled to announce its 1Q FY21 results on Jan. 26.

F5 Networks earlier this month raised its sales outlook and announced that it expects its FY21 and FY22 (Horizon 2) revenues to grow at a CAGR (Compounded Annual Growth Rate) of 7% to 8%, up from an earlier CAGR forecast of 6% to 7%. (See FFIV stock analysis on TipRanks)

Over the long-term, the company sees revenue growing at double-digit rates compared to a previous forecast of 8% to 9%. F5 Networks expects to generate double-digit non-GAAP growth in EPS (earnings per share) in Horizon 2 and is committed to share repurchases of $1 billion over the next two years. This includes a $500 million accelerated share repurchase program in FY21.

Earlier this month, Needham analyst Alex Henderson assigned a Buy rating and set a price target of $235 on the stock.

“We think the shift to software and subscription has been understating growth and the shift to application-driven growth from DC [data center] spending- driven sluggishness is a major positive,” Henderson wrote in a note to investors. “We think FFIV will re-rate higher by multiple turns as growth accelerates and margins expand.”

Overall, analysts are cautiously optimistic about the stock and the consensus is a Moderate Buy with 7 analysts recommending a Buy and 6 analysts suggesting a Hold. The average price target of $206.09 implies 0.6% downside potential to current levels. Shares have risen by 18% over the past month.

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