Buy Alert: March 7, 2013

Marcus Haber | March 7, 2013

Buy Alert: March 7, 2013

Trade Details

Buy F5 Networks (FFIV) April 2013 $105 Calls for $1.00 or better

Why?

FFIV is the leading provider of application delivery networking technology, with roughly 50% of the market. Yet, the stock plunged 7% in one day in late February and is now trading under all its key moving averages.

Why is the stock down?

Because a research firm downgraded the stock to a “sell” rating based on increasing competition in the application delivery space. You read that right. The stock’s down because ONE, solitary research firm downgraded it. And since when is it a surprise that a market leader has to deal with increasing competition. Isn’t that called capitalism?

I don’t see any reason to doubt FFIV at this point. I’ll start to worry about competition when it shows up in the company’s bottom line. Until then, I believe the selling is overdone and a bounce back is imminent.

We’re going a little further out of the money on this trade because the options are a bit expensive.