Citrix Systems, Inc.

CTXS Details

Citrix Systems, Inc. (NASDAQ: CTXS) makes virtualization software such Virtual Apps and Desktops and Citrix Virtual Apps for desktop virtualization and application virtualization, respectively. It sells and licenses its products through various channels worldwide, including resellers and direct sales over the Internet. CTXS also offers Citrix Endpoint Management for mobile device management, Citrix ADC for application delivery, and Citrix SDWAN for routing, security, and WAN monitoring.

Latest News:

• Strengthening Partnerships: CTXS and Nexthink, the pioneer in Digital Employee Experience (DEX) management software, launched the next phase of their collaboration on November 16, 2021. Combining their efforts to provide enterprises with a single perspective for end-to-end visibility of employees' digital interactions for customers using CTXS' secure remote work solutions, both companies are doubling down on the hybrid nature of work and the enhanced security it necessitates. Further, on November 09, 2021, Nilkamal Limited, a pioneer in manufacturing moulded furniture and material handling equipment, resorted to CTXS for its Virtual Apps and Desktops to meet its current needs but also to match with future demands and to evolve workplace dynamics.

9MFY21 Results:

• Slight fall in Topline: The company's total net revenues declined 2.50% during 9MFY21 (ended September 30, 2021) to USD 2.37 billion from USD 2.43 billion during 9MFY20, due to a decline in sales of its perpetual Workspace solutions and its maintenance services.
• Decline in Bottomline: The net income during 9MFY21 was USD 204.60 million vs. USD 392.36 million reported during 9MFY20.
• Leveraged Balance Sheet: As of September 30, 2021, the company's cash and cash equivalents (including short term investments) stood at USD 449.67 million, with a total debt of USD 3.33 billion.

Key Risks:

• Reliance on Third-Party Suppliers: CTXS relies on a small number of third-party suppliers and contract manufacturers to provide hardware or hardware components for its App Delivery and Security solutions. As a result, these suppliers' inability to provide these essential items could impact the company's operations and financial situation.

Outlook:

• Q4FY21 Estimates: CTXS forecasts sales in the Q4FY21 to be between USD 825-835 million. It also expects GAAP diluted EPS to be in the range of USD 0.19 to 0.25 and non-GAAP diluted EPS to be in the range of USD 1.04 to 1.09.
• FY21 Estimates: As on November 04, 2021, CTXS indicated its FY21 revenue guidance to be around USD 3.19-3.20 billion and expected its GAAP operating margin to be approximately 10%. CTXS further anticipates its GAAP diluted EPS to range between USD 1.81 – 1.87, along with a non-GAAP diluted EPS around USD 4.90 – 4.95.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CTXS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CTXS' share price has fallen 39.36% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 78.72 to USD 145.19. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 27.48, indicating an oversold zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 98.50.

Considering the dip in the stock price, new collaborations, steady dividend yield, robust profitability margins, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 79.49, up 0.98% as of December 02, 2021, 12:11 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

Xerox Holdings Corporation

XRX Details

Xerox Holdings Corporation (NASDAQ: XRX) is a workplace technology firm that develops and integrates software and hardware for large and small businesses. Equipment, paper and other sales, maintenance agreements, service arrangements, rental, and other financial services are among XRX's core product and service lines. The company has operations in the United States, Europe, Canada, and other nations.

Latest News:

• Share Buyback: In Q3FY21, XRX stated that it had repurchased 3.7 million shares of its common stock for a total of USD 87 million. Under the current share repurchase program, XRX has repurchased 45.5 million shares for a total cost of roughly USD 1,100 million. There was ~USD 500 thousand in the remaining share repurchase authorization as of September 30, 2021.
• Dividend Declaration: XRX declared a quarterly dividend of USD 0.25 per share on its common stock on October 21, 2021. The dividend will be payable on January 31, 2022, to shareholders of record on December 31, 2021. In addition, it also announced a USD 20 quarterly dividend on its outstanding Holdings Series A Convertible Perpetual Preferred Stock. The preferred dividend will be paid on January 01, 2022, to shareholders of record on December 15, 2021.

9MFY21 Results:

• Slight Improvement in Topline: The company's total revenues rose 3.32% during 9MFY21 (ended September 30, 2021) to USD 5.26 billion from USD 5.09 billion during 9MFY20, driven by the favorable impact from currency and recent partner dealer acquisition.
• Boost in Bottomline: The net income during 9MFY21 was USD 219 million vs. USD 115 million reported during 9MFY20.
• Decent Balance Sheet: As of September 30, 2021, the company's cash and cash equivalents stood at USD 2.21 billion, with a total debt of USD 4.32 billion.

Key Risks:

• Customer Concentration Risk: Contracts with US and international governments and agencies bring in a considerable amount of revenue for XRX. As a result, changes in government spending, adverse political events, financial limits, and other factors could harm the company's financial results.
• Reliance on Third Party Manufacturers: Many of XRX's production operations are outsourced to third parties (such as Fuji Xerox Co., Ltd.). Any failure by these third parties to establish adequate manufacturing procedures, respond quickly to changes in customer demand, or procure materials required for the manufacturing process could harm the company's finances.

Outlook:

• FY21 Estimates: As of October 26, 2021, XRX reduced its FY21 revenue guidance to USD 7.1 billion in actual currency (USD 7.0 billion in constant currency). It also reaffirmed its free cash-flow guidance of at least USD 500 million.
• Repurchase Guidance: XRX approved an additional USD 500 million share repurchase program to be used opportunistically after completing the planned USD 500 million in buybacks for FY21.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

XRX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

XRX's stock price has fallen 23.31% in the past nine months and is currently trading close to the lower-band of the 52-week range of USD 17.59 to USD 26.96. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 49.94. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 24.30.

Considering the correction in the stock price, proven track record, steady dividend yield, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 19.59, up 2.24% as of December 02, 2021, 10:45 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

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