Citrix Systems (CTXS) Stock Gains on Elliott Management Letter

NEW YORK (TheStreet) -- Shares of Citrix Systems (CTXS) were gaining 5.9% to $69.89 Thursday morning after activist investor Elliott Management sent a letter to the software company's board of directors.

In the letter Elliott, which owns a 7.1% stake in Citrix, urged the company to sell several units and buy back shares.

The activist investor highlighted CloudBridge, CloudPlatform, and ByteMobile as "non-core," underperforming units that are distractions to the company's management. "We believe these businesses, particularly ByteMobile, should be sold or realigned," Elliot said.

Elliott Management also urged Citrix to raise debt so it can have a buyback capacity of $4.3 billion to $5.3 billion through 2017.

The activist investor said that it believes Citrix can reach stock prices of $90 to $100 or higher by the end of 2016 if the company implements its changes.

TheStreet Ratings team rates CITRIX SYSTEMS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CITRIX SYSTEMS INC (CTXS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CTXS's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $291.87 million or 1.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -17.83%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • CITRIX SYSTEMS INC's earnings per share declined by 40.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CITRIX SYSTEMS INC reported lower earnings of $1.48 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($3.57 versus $1.48).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 48.4% when compared to the same quarter one year ago, falling from $55.94 million to $28.89 million.
  • You can view the full analysis from the report here: CTXS Ratings Report

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