This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Citrix Has Plenty to Prove

Stocks in this article: CTXS VMW RHT IBM ORCL CSCO

NEW YORK ( TheStreet) -- Desktop virtualization giant Citrix (CTXS), whose stock is down 26% over the past month, is still struggling to meet investors' high expectations.

There has always been plenty to like with Citrix's business but I believe the stock has been priced for perfection, which introduced plenty of risk. But Citrix hasn't been alone in this.

The Street has always had a love affair with companies having anything to do with the "cloud." VMware (VMW) and Red Hat (RHT), which have enjoyed above-average multiples and P/Es of 45 and 53, respectively, are perfect examples. Unfortunately, the growth expectations presumed by these valuations have not manifested into results.

In the case of Citrix, which has established itself as the go-to vendor for IT virtualization services and remote desktop technology, the company is rethinking its approach because enterprises are delaying system upgrades. Now, given VMware's relative performance, I do believe Citrix's struggle is more market-related than, say, a lack of execution. The dismal numbers we've seen from enterprise titans IBM (IBM) and Oracle (ORCL) supports this theory.

Nonetheless, it is worth asking: If enterprises are in no rush to reinvest in their system gear, are they proclaiming they no longer consider virtualization services a top priority? Given that overall IT spending is still down across the board, it's premature to say one way or another if this is the case.

But given that this stock -- even on this pullback -- is still relatively expensive, investors still holding here should realize it may be a while before Citrix demonstrates any sign of strength. The good news is Citrix will report third-quarter earnings on Wednesday. To the extent that management can prove to investors it has a strong pulse in this industry, this stock may finally reach bottom and then turn around.

Wednesday, the Street will be looking for Citrix to post 69 cents in earnings per share on revenue of $714 million, which would represent 11% year-over-year revenue growth. That's not a robust number relative to Citrix's historical performance where revenue growth has exceeded 20%. In this weak IP spending environment it's still not a cakewalk.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs