Citrix Analyst: 'Near-Term Pain For Long-Term Gain'

Citrix Systems, Inc. CTXS reported second-quarter results that fell notably short of the Street's estimates, but Wedbush says investors should accept "near-term pain for long-term gains."

The Analyst

Wedbush's Daniel Ives maintains a Neutral rating on Citrix Systems with a price target lowered from $100 to $95.

The Thesis

Citrix's transition to focus on a subscription model is progressing faster than expected across its major business units and this was evident in Wednesday's earnings report, Ives wrote in a note. Specifically, the company spent the past 18 months transitioning the company to better focus on cloud/subscription. During the second quarter management initially guided for cloud/subscription to represent 52% of the business but the actual number came in at 62%.

Ives said a shift towards a more visible business model is encouraging and the company deserves credit for its execution so far. In fact, the company offered a new metric ARR (annual recurring revenue), which will be a notable measure for the rest of 2019 and into next year to measure further improvements in the transition.

During the second quarter ARR was 33% higher year-over-year at $614 million and SaaS ARR was 50% higher year-over-year at $418 million.

Ives said investors with plenty of patience may benefit from Citrix's stock as "all the pieces are generally in place" for its cloud transition. However, the near-term picture is clouded with uncertainty in the field.

Price Action

Shares of Citrix were trading lower by more than 5% at $95.63 Thursday afternoon.

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