F5 Networks (FFIV) Up 7% on Share-Repurchase Plan Worth $1B
Shares of F5 Networks FFIV rallied 7.3% on Monday after the networking software company announced its plan to buyback $1 billion worth of the company’s common stock over the next two fiscals. Its share-buyback plan includes the accelerated repurchase of $500 million worth of shares in fiscal 2021 and another normal buyback worth $500 million in fiscal 2022.
F5 Networks’ financial strength enables it to continue with the buyback program. As of Sep 30, 2020, the company’s cash and short-term investments were $1.21 billion. In fiscal 2020 (ending Sep 30, 2020), the company repurchased stocks worth $100 million.
Its aggressive share-repurchase policies are anticipated to boost investor confidence. F5 Networks’ strategy to return wealth to shareholders highlights its growth potential and stable liquidity position.
F5 Networks, Inc. Price and Consensus
F5 Networks, Inc. price-consensus-chart | F5 Networks, Inc. Quote
We believe apart from strategic investments, a continued focus on such shareholder-friendly initiatives will further boost the company’s shares. Notably, F5 Networks has appreciated nearly 11% in the year so far.
Other companies that have a consistent record of returning value through share repurchases and dividend payments are Apple Inc. AAPL, Cisco CSCO and NVIDIA NVDA.
We believe, apart from enhancing shareholder returns, these initiatives also raise the market value of the stock. Through share repurchases and dividend payouts, companies boost investor confidence, persuading them to either buy or hold the scrip.
Apart from announcing a massive share-repurchase plan, the company issued the outlook for both fiscal 2021 and 2022, as well as set long-term (circa 2025) targets.
Fiscals 2021 & 2022 Outlook
For the next two fiscals, the company anticipates total revenues to be up at a CAGR of 6-7%. It projects Software revenues to increase at a CAGR of 35-40%. The company forecasts its Software sales to represent at least 50% of the total product revenues by fiscal 2022.
F5 Networks expects its fiscal 2021 non-GAAP operating margin between 31% and 32%, and 32-34% for fiscal 2022. The company forecasts non-GAAP earnings per share to grow in the double-digit range in the next two fiscals.
Long-Term Targets
Management has set a long-term target of achieving revenue growth between 8% and 9% by 2025. Software revenues are expected to grow by more than 20% through the next five fiscals. It projects Software sales to represent at least 75% of product revenues.
Non-GAAP operating margin is anticipated in the mid-30% range by 2025. Non-GAAP earnings per share are projected to increase in the double-digit range over the next five fiscals. Additionally, from fiscal 2023 onward, the company intends to return 50% of free cash flow to its shareholders through share repurchases.
F5 Networks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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