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Here's Why You Should Retain Citrix (CTXS) in Your Portfolio
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Citrix Systems Inc. is benefiting from robust adoption of its subscription based services as evident from its third-quarter 2018 results.
In third-quarter 2018, revenues increased 6% from the year-ago quarter to $732.5 million and comfortably surpassed the Zacks Consensus Estimate of $723 million. Non-GAAP earnings of $1.40 per share beat the Zacks Consensus Estimate by 15 cents. The figure surged 14.8% on a year-over-year basis driven by robust increase in orders and revenues, and improved operational efficiency.
Citrix reported 55 transactions worth more than $1 million in the reported quarter, primarily from technology, healthcare and government sectors. Solid adoption of unified workspace solutions and hybrid cloud offerings are key catalysts. Traction witnessed by ShareFile is also notable.
Notably, shares of the company have returned 21.3%, outperforming the industry’s rally of 14.6% on a year-to-date basis.
Moreover, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive earnings surprise of 11.3%.
With expected long-term earnings per share growth rate of 9.2% and a market cap of $14.38 billion, it seems to be a stock that investors should retain in their portfolio at least for now.
Strategic Acquisitions Enhance Portfolio
Citrix recently acquired Sapho in a bid to empower company’s comprehensive Citrix Workspace suite with guided work capabilities. Reportedly, the company completed the buyout for approximately $200 million in cash. The deal was announced on Nov 15.
Sapho, a startup based out of San Bruno, CA, develops micro applications by integrating access to activities, tasks and tools across consolidated work feeds, consequently bolstering employee productivity.
Sapho’s clientele comprises notable names including the likes of Broadcom (AVGO - Free Report) , CBS Interactive, evo, among other customers. Additionally, integration of Sapho, which the company anticipates to conclude around second half of 2019, is expected to enhance Citrix’s workspace capabilities. This in turn is likely to aid the company’s revenue growth, going forward.
Notably, Workspace services revenues increased 7% year over year to $462 million in the third quarter due to rapid adoption of unified workspace solutions. Management stated that approximately 50% of new product bookings were subscription based.
On the back of ongoing workspace trends of Bring Your Own Devices (“BYOD”) and increasing mobile workers, among other factors, the desktop virtualization market is anticipated to accelerate in the near future. Small and medium enterprises, healthcare companies and increasing popularity of desktop virtualization across Asia-Pacific remain key growth drivers in the space.
In fact, per Orbis Research data as revealed by Reuters, the desktop virtualization market is projected to reach $8.96 billion by 2023 from $4.98 billion valued in 2017at a CAGR of 10.3% from 2018 to 2023.
We believe acquisition of Sapho will enable the company to fortify its competitive position in the rapidly growing desktop virtualization market.
In a customer-friendly move, the company had purchased Cedexis — a web monitoring company. Apart from expanding the choices to Citrix’s customers, the deal offers increased flexibility aimed at improving its operational performance and efficiencies.
Partnerships & Collaborations Aid Citrix to Expand Business
Citrix has expanded its business through partnerships with established sector players. Citrix, in collaboration with Microsoft (MSFT - Free Report) , provides services enabling enterprises to deploy Windows 10 desktop systems and other apps, and tools directly on Azure cloud platform, consequently simplifying the implementation of new workspaces.
In collaboration with Nutanix (NTNX - Free Report) , Citrix devised a scalable hyper-converged infrastructure (“HCI”) solution aimed at enhancing productivity through minimized infrastructure complexity. Nutanix’s InstantOn solution complements Citrix’s cloud-based XenApp and XenDesktop solutions, empowering customers with a cost-effective high-performance solution offering seamless access to desktops and applications.
The company has also extended the application of ShareFile workflows and connectors to Google Drive and G-Suite, as part of its ongoing alliance with Google.
Moreover, the company has deployed its Cloud services including XenDesktop and XenApp on Oracle Cloud Marketplace. This is likely to lead to new customer additions, consequently generating incremental revenues.
We believe the extended collaborations augur well for the company in the long haul amid the digital transformation era, wherein enterprises seek to find a common ground between on-premise and cloud infrastructures.
Buyback & Dividend Payments Bode Well
Citrix repurchased approximately 1.1 million shares during the third quarter. Moreover, roughly $398 million is still remaining under share repurchase authorization.
The company increased ongoing share repurchase program by $750 million and announced the first-ever quarterly dividend payment of 35 cents to be paid on Dec 21, 2018.
These initiatives are anticipated to bolster investors’ confidence in the stock.
However, Citrix is facing increased competition from all product group segments. Citrix Workspace solutions compete with VMware's Horizon, Workspace ONE, and AirWatch offerings and Amazon Web Service’s (“AWS”) Amazon WorkSpaces, Microsoft (particularly post the acquisition of FSLogix), among others.
Considering networking solutions, the company faces competition from companies including the likes of F5 Networks, Fortinet, and AWS. Citrix’s content collaboration offering, ShareFile directly competes with Box, Dropbox, Alphabet’s Google and Microsoft, among other companies. Intensifying competition negatively impacts pricing power, which is likely to keep margins under pressure.
Nevertheless, acquisitions and partnerships are anticipated to help Citrix rapidly strengthen presence in the desktop virtualization market.
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Here's Why You Should Retain Citrix (CTXS) in Your Portfolio
Citrix Systems Inc. is benefiting from robust adoption of its subscription based services as evident from its third-quarter 2018 results.
In third-quarter 2018, revenues increased 6% from the year-ago quarter to $732.5 million and comfortably surpassed the Zacks Consensus Estimate of $723 million. Non-GAAP earnings of $1.40 per share beat the Zacks Consensus Estimate by 15 cents. The figure surged 14.8% on a year-over-year basis driven by robust increase in orders and revenues, and improved operational efficiency.
Citrix reported 55 transactions worth more than $1 million in the reported quarter, primarily from technology, healthcare and government sectors. Solid adoption of unified workspace solutions and hybrid cloud offerings are key catalysts. Traction witnessed by ShareFile is also notable.
Notably, shares of the company have returned 21.3%, outperforming the industry’s rally of 14.6% on a year-to-date basis.
Moreover, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive earnings surprise of 11.3%.
With expected long-term earnings per share growth rate of 9.2% and a market cap of $14.38 billion, it seems to be a stock that investors should retain in their portfolio at least for now.
Strategic Acquisitions Enhance Portfolio
Citrix recently acquired Sapho in a bid to empower company’s comprehensive Citrix Workspace suite with guided work capabilities. Reportedly, the company completed the buyout for approximately $200 million in cash. The deal was announced on Nov 15.
Sapho, a startup based out of San Bruno, CA, develops micro applications by integrating access to activities, tasks and tools across consolidated work feeds, consequently bolstering employee productivity.
Sapho’s clientele comprises notable names including the likes of Broadcom (AVGO - Free Report) , CBS Interactive, evo, among other customers. Additionally, integration of Sapho, which the company anticipates to conclude around second half of 2019, is expected to enhance Citrix’s workspace capabilities. This in turn is likely to aid the company’s revenue growth, going forward.
Notably, Workspace services revenues increased 7% year over year to $462 million in the third quarter due to rapid adoption of unified workspace solutions. Management stated that approximately 50% of new product bookings were subscription based.
On the back of ongoing workspace trends of Bring Your Own Devices (“BYOD”) and increasing mobile workers, among other factors, the desktop virtualization market is anticipated to accelerate in the near future. Small and medium enterprises, healthcare companies and increasing popularity of desktop virtualization across Asia-Pacific remain key growth drivers in the space.
In fact, per Orbis Research data as revealed by Reuters, the desktop virtualization market is projected to reach $8.96 billion by 2023 from $4.98 billion valued in 2017at a CAGR of 10.3% from 2018 to 2023.
We believe acquisition of Sapho will enable the company to fortify its competitive position in the rapidly growing desktop virtualization market.
In a customer-friendly move, the company had purchased Cedexis — a web monitoring company. Apart from expanding the choices to Citrix’s customers, the deal offers increased flexibility aimed at improving its operational performance and efficiencies.
Partnerships & Collaborations Aid Citrix to Expand Business
Citrix has expanded its business through partnerships with established sector players. Citrix, in collaboration with Microsoft (MSFT - Free Report) , provides services enabling enterprises to deploy Windows 10 desktop systems and other apps, and tools directly on Azure cloud platform, consequently simplifying the implementation of new workspaces.
In collaboration with Nutanix (NTNX - Free Report) , Citrix devised a scalable hyper-converged infrastructure (“HCI”) solution aimed at enhancing productivity through minimized infrastructure complexity. Nutanix’s InstantOn solution complements Citrix’s cloud-based XenApp and XenDesktop solutions, empowering customers with a cost-effective high-performance solution offering seamless access to desktops and applications.
The company has also extended the application of ShareFile workflows and connectors to Google Drive and G-Suite, as part of its ongoing alliance with Google.
Moreover, the company has deployed its Cloud services including XenDesktop and XenApp on Oracle Cloud Marketplace. This is likely to lead to new customer additions, consequently generating incremental revenues.
We believe the extended collaborations augur well for the company in the long haul amid the digital transformation era, wherein enterprises seek to find a common ground between on-premise and cloud infrastructures.
Buyback & Dividend Payments Bode Well
Citrix repurchased approximately 1.1 million shares during the third quarter. Moreover, roughly $398 million is still remaining under share repurchase authorization.
The company increased ongoing share repurchase program by $750 million and announced the first-ever quarterly dividend payment of 35 cents to be paid on Dec 21, 2018.
These initiatives are anticipated to bolster investors’ confidence in the stock.
Citrix Systems, Inc. Revenue (TTM)
Citrix Systems, Inc. Revenue (TTM) | Citrix Systems, Inc. Quote
Competition Remains a Concern
However, Citrix is facing increased competition from all product group segments. Citrix Workspace solutions compete with VMware's Horizon, Workspace ONE, and AirWatch offerings and Amazon Web Service’s (“AWS”) Amazon WorkSpaces, Microsoft (particularly post the acquisition of FSLogix), among others.
Considering networking solutions, the company faces competition from companies including the likes of F5 Networks, Fortinet, and AWS. Citrix’s content collaboration offering, ShareFile directly competes with Box, Dropbox, Alphabet’s Google and Microsoft, among other companies. Intensifying competition negatively impacts pricing power, which is likely to keep margins under pressure.
Nevertheless, acquisitions and partnerships are anticipated to help Citrix rapidly strengthen presence in the desktop virtualization market.
All these factors are reasons enough to retain this Zacks Rank #3 (Hold) stock in investors’ portfolio at least for the time being. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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