Wednesday, Piper Sandler maintained a Neutral rating on F5 Networks (NASDAQ:FFIV) stock with a steady price target of $167.00.
The firm's outlook follows recent discussions with F5's corporate officers, revealing the company's strategic moves in the API Security market through its Dynamic Cloud Services (DCS) platform.
F5's focus on integrating API Security as a key component of its application security and delivery services is highlighted as a significant development.
The discussions with F5's Chief Product Officer, Field Chief Technology Officer for API Security, and Vice President of Investor Relations, shed light on the company's efforts to build a comprehensive application delivery and security platform. The addition of API Security is seen as a crucial new feature in the application security landscape.
According to Piper Sandler, the API Security market is still nascent, and there is potential for significant growth, likening it to the bot management sector that has seen attach-rates of about 20-25% in core web application firewall (WAF) deals. This could represent a $100M-$200M opportunity for F5.
The firm suggests that for F5 to effectively compete, it should consider bundling its offerings, including NGINX, DCS, and API Security, into strong package deals or enterprise license agreements (ELAs) rather than selling them as separate products.
F5's pivot towards DCS is seen as the correct strategic direction, although it may place pressure on the company's near-term fundamentals.
Piper Sandler's stance remains unchanged as they continue to observe F5's transition and its impact on the company's performance. The firm recognizes the potential in F5's strategy but awaits more tangible outcomes before altering its position on the stock.
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