The workspace services solutions and delivery networking products provider Citrix Systems, Inc. (CTXS) has gained nearly 15% over the past year as the demand for its products and services accelerated thanks to the COVID-19-pandemic-driven remote-working trend. The enterprise software company is expected to advance in the coming months based on an expectation that the ‘work-from-anywhere’ trend will continue even after the pandemic is beaten.
CTXS serves companies in different various sectors, for example Baloise Holding (BALN) in the banking and financial services sector, State of Illinois in the public sector, Fairview Health Services, and Vestas Wind Systems A/S (VWDRY) in the manufacturing sector, among others.
CTXS is also expected to gain significantly going forward given its impressive financials and strategic acquisitions.
Click here to check out our Software Industry Report for 2021
Here’s what I think could shape CTXS’ performance in the near term:
Impressive Historical Growth
CTXS has gained 83.2% over the past five years and 43.3% over the past 3 years owing to its financial strength and the ability to adapt to the changing market needs. 98% of the Fortune 500 companies are CTXS’ clients. Moreover, the company’s revenue and EPS increased at CAGRs of 4.6% and 205.7%, respectively, over the past three years.
Acquisition of Wrike
On March 1, CTXS completed the acquisition of Wrike, a leading provider of SaaS collaborative work management solutions. Wrike is expected to complement CTXS’ accelerating SaaS business and expand the company’s Workspace by providing a cloud-delivered digital workspace experience that allows employees to securely access, collaborate and execute their work from anywhere. The company also expects the acquisition to contribute to adding value outside of CTXS’ core virtualization capabilities.
Impressive Recent Financials
CTXS’ total net revenues increased 5.5% sequentially to $809.66 million for the fourth quarter, ended December 31, 2020. This was driven primarily by an increase in subscription revenues. Revenues from the subscription segment increased nearly 76% year-over-year to $340.51 million for the quarter. Its net income for the quarter was $112.09 million, up more than 14% sequentially, and its non-GAAP EPS of $1.46 surpassed a consensus estimate by 9.8%. In fact, CTXS beat the consensus EPS estimates in each of the trailing four quarters.
Consensus Price Target Indicates Solid Upside
Wall Street analysts expect the stock to hit $159.23 in the near term, which indicates a potential upside of 16.5%. The stock also has an average broker rating of 1.67, indicating favorable analyst sentiment.
POWR Ratings Show Promise
CTXS has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, CTXS has an A grade for Quality given its trailing-12-month gross profit margin of 85.6%, which is much higher than the industry average 47.9%.
The stock has a B grade for Value. This is consistent with its non-GAAP forward price/earnings of 21.34x, which is 14.7% lower than the industry average 25.03x.
We have also graded CTXS for Growth, Momentum, Stability and Sentiment. Click here to access all of CTXS’ ratings.
CTXS is ranked #16 of 60 stocks in the Software – Business industry.
Click here to access 20 other top-rated stocks in the same industry.
Bottom Line
CTXS is expected to thrive this year and beyond because the work-from-home trend is likely here to stay. Furthermore, CTXS is expected to gain significantly in the coming months due to its strategic acquisition of Wrike and its existing partnerships with industry leaders.
CTXS shares rose $1.31 (+1.00%) in premarket trading Tuesday. Year-to-date, CTXS has gained 1.98%, versus a 3.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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