Morningstar | Cloud Traction Persists for Citrix; Raising FVE to $88. See Updated Analyst Note from 24 Oct 2018
Citrix reported solid third-quarter results with Citrix Cloud’s continued popularity spurring its ongoing shift to a subscription model. But that wasn’t the only transition. Citrix’s reported results showed a significant fall in hyperscale revenue under the company’s networking segment. We are not disturbed by the fall, however, as we believe Citrix has more appeal in its NetScaler SD-WAN offering, which inherently lends itself to being cross-sold with workspace services. We expect subscription offerings and cloud services to continue growing in the fourth quarter and, after adjusting for significantly higher EPS in fiscal year 2018, we are raising our fair value estimate for this narrow-moat company to $88 from $83. However, we stress that Citrix is a high uncertainty name and we believe that growth will decelerate in proportion with the decelerating cloud transition.In the third quarter, revenue rose 6% year over year to $732 million. Seasonality decelerated subscription revenue, which still grew by a hefty 37% year over year and is expected to accelerate in a strong fourth quarter. Workspace services held its ground, replicating its 7% year-over-year growth rate from last quarter, thanks to Citrix Cloud. Meanwhile networking revenue showed stability, growing 5% year over year to $195 million, which was the result of enterprise offsetting poor hyperscale performance. Hyperscale SSP was down 20% year over year, while enterprise grew in the double digits. We think this shift will prove to be sustainable, as we are relying on SD-WAN to continue to pick up the slack. We expect SD-WAN (under the networking segment) to grow rapidly given its superior use in the cloud.
Looking ahead, Citrix slightly raised its revenue outlook for fiscal 2018 to $2.95 billion to $2.97 billion. Fiscal 2018 non-GAAP diluted earnings per share was significantly raised to $5.55 to $5.60, hence our fair value adjustment.
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.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.