We reaffirm our long-term Neutral recommendation on
Citrix Systems Inc.
(
CTXS
). The company posted strong financial results for the fourth
quarter of 2012, outpacing the Zacks Consensus Estimates.
Why Kept Neutral?
The stock price of Citrix moved up nearly 33% in the last
year, outpacing the S&P 500 return of just 23.4% over the
same period. Citrix is currently trading at the high end of its
52-week price range. With respect to several valuation metrics,
the stock is also trading at significantly higher multiples
compared to the S&P 500. We believe the company is currently
fairly valued and the stock price will not provide above market
gains any time soon. Citrix currently has a Zacks Rank #3
(Hold).
Risk/Reward Balance Citrix
Citrix is concentrating on three broad markets: Desktop
virtualization, Cloud Infrastructure and networking, and
Collaboration and sharing. In fourth-quarter 2012, 55 deals
exceeded $1 million. Out of the total, 42 orders were for
XenDesktop alone, the flagship desktop virtualization product of
Citrix.
The acquisition of Cloud.com Inc. provided Citrix the
CloudStack product suite to offer an open-source
platform-as-a-serviceenvironment that enables the cloud service
providers to deploy and manage scalable applications in a
simplistic and cost-effective way. With Cloud.com in its kitty,
Citrix is now comfortably placed at par with the cloud computing
software leader,
VMware Inc.
(
VMW
). The company became a strong challenger for
Amazon.com Inc.
's (
AMZN
) web services software and
Microsoft Corp.
's (
MSFT
) Windows Azure software. Citrix further strengthened its
position in the cloud-based data storage segment after its
acquisition of ShareFile, a leading provider of secure,
cloud-based data storage, sharing and collaboration
solutions.
Nevertheless, the global economy is still suffering from
fluctuations and yet to fully recover from recession. Various
geo-political concerns in the European and African countries have
slowed the momentum of economic recovery. This may make Citirix's
near-term financials volatile.
Any adverse macro-economic situation may result in the
slowdown of enterprise IT spending. Hence, the desktop
virtualization market may evolve less than anticipated and Citrix
may lose its market share more quickly than expected. At
present,Citrix is facing two pronged problems: (1) continuation
of global macroeconomic headwinds slows the momentum of new
license sales and (2) growing demand for tablets instead of PCs
or notebooks.
AMAZON.COM INC (AMZN): Free Stock Analysis
Report
CITRIX SYS INC (CTXS): Free Stock Analysis
Report
MICROSOFT CORP (MSFT): Free Stock Analysis
Report
VMWARE INC-A (VMW): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research