This Day On The Street
Continue to site
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

Citrix Has Plenty to Prove

NEW YORK ( TheStreet) -- Desktop virtualization giant Citrix (CTXS - Get Report), 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.
[Read: <a target="blank" data-add-tracking="true" href=""><em>iPad Event: A 'Most Important iPad Refresh'</em></a>]

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CTXS $76.85 0.64%
AAPL $117.81 -0.19%
FB $105.45 0.04%
GOOG $750.26 0.28%
TSLA $231.61 0.86%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs