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Citrix Systems (CTXS) Grapples With Cost Woes: Time to Dump?

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On Dec 26, we issued an updated research report on Citrix Systems, Inc. (CTXS - Free Report) . The stock has been downgraded to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold). Going by the Zacks proven model, the Sell-rated stocks (#4 or 5) are likely to underperform the broader market over the next one-three months.

Reasons Behind the Downgrade

High costs are limiting the company’s bottom-line growth and the fourth quarter is likely to be no different in this regard. Additionally, declining revenues from products also pose a severe challenge to the company.
 
Moreover, frequent management changes do not bode well for the company and have potential to shake investors’ confidence in the stock. Notably, in July, the company made a change at its helm, replacing Kirill Tatarinov with David J. Henshall as its chief executive officer (CEO). Henshall’s appointment implies that Citrix has had four CEOs in less than two years.

The company’s results are also liable to be affected by foreign exchange movements as it continues to foray into non-U.S. markets.

Shares of Citrix Systems have underperformed the industry it belongs to in a year. The stock has declined 3.3% against the industry’s gain of 33.9% over the same period.


 

The company’s VGM Score of C also raises concerns. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all these three scores.

Key Picks

Some better-ranked stocks in the same space are Nuance Communications, Inc. (NUAN - Free Report) , Rosetta Stone (RST - Free Report) and ANSYS, Inc. (ANSS - Free Report) . While Nuance Communications and Rosetta Stone sport a Zacks Rank #1 (Strong Buy), ANSYS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Nuance Communications, Rosetta Stone and ANSYS have gained more than 10%, 43% and 58%, respectively, in a year.

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