Citrix Systems (NASDAQ:CTXS) burst higher in January on better-than-expected earnings, but then got caught up in the novel coronavirus selloff. Investors keen on the current trends made a killing though. The selloff in CTXS stock didn’t last long, with shares bursting higher from the February lows.
Source: Ken Wolter / Shutterstock.com
Notice that I said the “February lows” and not the March lows.
Unlike the rest of the market, which topped in mid-February and bottomed in mid-January, Citrix topped in January and bottomed in February. The stock tested down into a key moving average and actually had a very solid March, up 37%.
Despite the relative strength we saw at the height of the coronavirus selloff, the bulls have not been running wild with this one. That’s likely as growth estimates have not ballooned in the way that many other coronavirus plays have, like Zoom Video (NASDAQ:ZM) or Netflix (NASDAQ:NFLX).
Breaking Down CTXS Stock
So what kind of growth estimates are we dealing with? Analysts expect sales to grow just 5% this year and 3.2% next year. That’s alongside flat earnings growth in 2020 and forecasts for 9.4% growth in 2021.
One would think that a potential work-from-home play would have better growth than that. Particularly in an era where this movement is gaining significant traction fueled by a global pandemic.
According to their website, Citrix “gives people access to all the apps they use for work — web, virtual, mobile, and SaaS — from one easy-to-use portal on any of their devices, from wherever they need to work. And because the entire workspace is centralized, IT can see everything that’s going on and have a simple way to manage and control it all.”
Or how one customer put it, “You have your workplace with you, in your pocket. Even if you leave the office and shut down your session, you start working again on the train, and the cursor is in the same position as you left it in the office. This is the future. This is how it should work.”
That should be perfect for the current environment. That was reflected in the most recent quarter, where revenue jumped 19.7%. Earnings of $1.73 per share smashed expectations by 56 cents. That was for the quarter ending March 31, so why do consensus expectations call for a 40 basis point decline in revenue this quarter?
The midpoint of management’s guidance was a little ahead of consensus expectations, but mostly in-line. They did raise the high-end of their earnings and revenue outlook, but management certainly isn’t calling for explosive growth.
The only thing to add to that is, if you go through the conference call, management made a point to say they are being cautious with their outlook. Remember, this call took place in mid-April, while management also said they saw some business momentum in the month.
Bottom Line on Citrix Systems
Click to Enlarge
Source: Chart courtesy of StockCharts.com
Here’s the thing with Citrix stock: Shares are up big, but lagging much of the tech space.
Currently, CTXS stock is up about 50% from the March lows. That actually lags the Invesco QQQ ETF (NASDAQ:QQQ) and barely edges out the S&P 500’s 45% rebound.
I’m not saying that Citrix should be up 100% or more. But we’re talking about a company with steady growth and positive free cash flow. Perhaps it doesn’t have mind-boggling growth at the moment, but it’s at least centered in a secular theme.
When looking at the chart above, I am more inclined to buy the dip than to sell it. That is particularly true if shares correct back into the low-$140s. There it finds the 20-day and 50-day moving averages, as well as uptrend support (blue line). Below $135 though and this stock may be set for more losses in the short term.
Over $155 resistance and the two-times range extension comes into play near $160.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
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