In a report published Monday, January 12, Citigroup’s Walter H Pritchard proposed a pair trade including VMware, Inc. VMW and Citrix Systems, Inc. CTXS. Based on upcoming catalysts, the analyst named VMware among his most preferred stocks, and Citrix Systems among his least favorites in the software sector.
The Sector
Citigroup specialists looking into the systems software and application software industries said they “believe sector set-up favors growth (vs. hyper-growth) and applications software (vs. infrastructure).” They also see “subscription transitioning remaining theme, although with more differentiation in stock performance across the various names here.”According to the report, Citigroup expects “more of a return of product cycle investing after a dearth in 2014 although industry conditions of less cash-rich acquirors and higher valuations keeping a lid on consolidation.”
The Pick
On top of Citigroup, which recommended VMware January 12, several other major Wall Street research firms endorsed the stock recently. On January 6, Barclays reiterated an Overweight, accompanied by a $100 price target; in late-December, Jefferies issued a Buy and a $128 price target.The stock currently trades slightly below $81.
On the opposite sidewalk, Piper Jaffray is quite bearish, and assumed coverage on the stock on December 12 with an Underweight rating and a $69 price target.
The Pan
Similar to Citigroup, other research firms do not like Citrix Systems either. Once again, Piper Jaffray was amongst the bears, and assumed coverage with an Underweight and a $63 price target on December 11.
In late-November, Jefferies initiated coverage with a Hold rating and a $64 price target.
The stock is trading around $61.05 at the time of this writing; the upside potential looks pretty limited.
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