Morningstar | Citrix Systems: A Leaner Company With a Full Plate; Shares Fairly Valued. See Updated Analyst Note from 03 Jul 2019
After revisiting our thesis on Citrix Systems, we are maintaining our narrow moat rating, upgrading our moat trend to stable from negative, and raising our fair value estimate to $100 per share from $88. Citrix improves software and hardware performance and enables a mobile workforce through its core infrastructure software solutions for virtualization, application delivery, monitoring, control, and remote access. After a difficult period involving an activist investor, Citrix has rationalized its portfolio, slowed its acquisition pipeline, improved margins, and completed substantial buybacks. We expect the company to continue down this path over the next several years. We think there are too many moving parts and believe the shares are about fairly valued at present levels.Citrix dominates desktop virtualization and is a strong competitor in application delivery, but it is more of an industry participant in its other served markets. We believe Citrix’s core markets for virtualization and application delivery have matured and that the company will need some of its smaller products, such as SD-WAN, to help drive overall growth. Application delivery in particular saw a rough period for several years as public cloud providers offered it as a part of a broad infrastructure solution. As the dust settled in 2018, we believe the reality of hybrid cloud and multi cloud workloads have provided stability to Citrix and other application delivery providers.
Citrix is undergoing a model transition from perpetual license to subscriptions, which while we think this is long overdue, we also believe could cause some modest disruption. The company is also in the early stages of pushing Citrix Cloud, a new digital workspace, and analytics. We think the company will successfully migrate most of its customers to subscription delivery and to the modern version of the Workspace, but we think this is a multi-year effort. Early progress indication is encouraging, in our view.
Citrix Systems is an enterprise software company. The company markets and licenses its solutions through multiple channels worldwide, including selling through resellers, direct and over the Web. The company's partner community comprises thousands of value-added resellers known as Citrix Solution Advisors, value-added distributors, systems integrators, independent software vendors, original equipment manufacturers and Citrix Service Providers. The company provides solutions and services that it categorizes into three inter-related and complementary areas: Workspace, Networking and Professional Services.
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