5 Tech Stocks To Watch After Earnings Warnings

Chris Lau, Kapitall: We’re entering earnings season again, so are there some tech stocks to watch now?

Congress finally agreed to a deal covering the federal budget and debt ceiling, but earnings season for the markets has been marching ahead like it’s business as usual.

Read more on gaming from Kapitall: Twitch.tv to Bring Social Gaming to the Masses

We’ve already told you about some healthcare firms potentially benefitting during this time, but what about tech stocks? And are there any names on the brink of a downward trend?

Click on the interactive charts below to see data over time.

Enterprise IT

Enterprise virtualization product provider Citrix Systems ( CTXS ) issued a quarterly earnings warning, sending its shares down 16% on the week of October 9 and down nearly 20% on the month.

Without any reasons provided for the negativity, investors may be wondering if other enterprise software and services vendors are facing a tough quarter. If they are, then more downside could be expected.

Citrix said that revenue for the quarter ended September 30 will be $710 – $712 million, compared with a previous guidance that was as high as $740 million. Net income will be $0.39 – $0.40 per share, a penny shy of the guidance of $0.41-$0.42 per share provided previously.

Citrix will provide more details on the lower earnings on October 23, 2013.

Other tech stocks to watch

Citrix is not the only company giving earnings warnings. In September, Red Hat ( RHT ) announced it would report lower revenue in its fiscal 2014. Revenue is expected to be $1.51 – $1.52 billion, compared to a previous consensus of $1.53 billion.

For Q3, revenue is expected to be much lower than consensus, at $381 – $384 million, compared to $391.5 million. Red Hat faced slower billings in Europe, while large deal arrangements contributed less to results.

Falling in sympathy with Citrix was VMWare ( VMW ), whose shares fell about 9% in a month. Like Citrix, VMWare provides virtualization infrastructure solutions. The companies both help enterprises operate more efficiently, by reducing the amount of hardware needed and making server maintenance easier.

Below is a chart comparing the forward P/E (or price of profitability) against quarterly sales:

VMWare could be winning business from Citrix customers, and may still report solid earnings on October 21. It might be better for investors to avoid VMWare until after the company provides a clearer picture of the business conditions.

F5 Networks ( FFIV ) and NetApp ( NTAP ) are also reporting after VMWare, on October 23 and November 13, respectively.  F5 trades at a lofty price to sales premium of 4.91, but is expected to have a strong quarter. In July, the firm provided a strong Q4 revenue guidance.

Do you think any of these tech stocks to watch are worth considering during earnings season? Use the list below as a starting point for your own analysis. 

1. Citrix Systems, Inc. ( CTXS): Designs, develops, and markets technology solutions that deliver information technology services on-demand worldwide. Market cap at $10.96B, most recent closing price at $58.54.


2. Red Hat, Inc. ( RHT): Provides open source software solutions to enterprises worldwide. Market cap at $8.12B, most recent closing price at $42.84.


3. VMware, Inc. ( VMW): Provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. Market cap at $34.38B, most recent closing price at $80.28.


4. F5 Networks, Inc. ( FFIV): Provides technology that optimizes network-based applications, the security, performance, and availability of servers, and data storage devices. Market cap at $7.08B, most recent closing price at $90.21.


5. NetApp, Inc. ( NTAP): Engages in the design, manufacturing, marketing, and technical support of networked storage solutions. Market cap at $14.64B, most recent closing price at $41.73.

(Written by Chris Lau, a Kapitall Contributor. All data sourced from Zacks Investment Research.)