F5's Headwinds Aren't Letting Up

When I last wrote about F5 Networks (NASDAQ:FFIV) in the summer of 2016, I was skeptical that the company's new product launch/refresh cycle was going to deliver as much growth as the bulls hoped. So far, that call looks to be working out. Although the shares are up around 5% since that last article, that performance lags that of the NASDAQ and a broad peer group of companies like Cisco (NASDAQ:CSCO), Juniper (NYSE:JNPR), and A10 (NYSE:ATEN). What's more, numbers have been heading lower as the expected product growth has been slow to arrive.

I continue to believe that F5 is dealing with some troubling secular headwinds. Cloud service providers like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) are improving their ADC/load balancing services, and companies like Cisco are tough competitors in security. While I do still think there are opportunities out there for F5, I worry about how the shares will perform without stronger revenue growth. The implied return at this price isn't bad, but I think there could be further revisions to estimates before this cycle is over, and low-growth/high-margin tech stocks can be frustrating to own.

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F5's Headwinds Aren't Letting Up