Neutral on Citrix Systems

We maintain our long-term Neutral recommendation for Citrix Systems Inc. (CTXS), which means the stock will perform mostly in line with the broader market. The company continues to grow as virtualization and cloud computing becomes essential for large enterprises to reduce operating costs when the economy has just started to recover from recession.

As a leading provider of enterprises software solutions with desktop virtualization at its core, the company will benefit immensely from increasing trend towards globalization. Citrix’s major products like XenDesktop, NetScaler, and Online Collaboration are generating massive revenues. We believe the virtualization market will flourish with desktop virtualization as its central point.

Research firm Gartner has estimated that desktop virtualization will be on 50 million personal computers by 2013. Centralized management of employee desktops will provide greater security, control and cost savings. At the same time, virtual desktop will also give end-users flexibility, choice and self service. The desktop virtualization market size may exceed $1 billion in 2010.

Citrix has also strengthened its web conferencing solutions by adding integrated toll-free audio services for its GoToMeeting Corporate and GoToWebinar product-lines, which grew over 30% year-over-year. Various industry researchers estimated that the global web conferencing market size may exceed $4 billion by 2014.

At the same time it is also our view that all these positives are already reflected in current valuation leaving little room for any above market gain. The stock price of Citrix has moved up by more than 89% during the last one year. Currently Citrix is trading at the high-end of its 52-week price range and at significantly higher multiples with respect to several valuation metrics compared to its peers as well as S&P 500 average.

CITRIX SYS INC (CTXS): Free Stock Analysis Report

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