After reporting disappointing numbers in the previous quarter, Citrix Systems (CTXS, Financial) cheered the street with its fourth-quarter results. The company reported better-than-expected revenue and profits for the quarter but failed to match the future estimates with the analysts’ consensus. In spite of this, the numbers are quite encouraging considering the weak financials in the third quarter. Led by these challenges the stock had been on a downturn since September 2014 with every peak on the chart lower than its previous one. Let’s analyze the factors that will impact its future stock prices and see whether it has hit the bottom or not.
Impressive moves
Taking a serious note of the headwinds in the previous quarter the management took firm steps and began its restructuring. In this direction it has decided to cut around 900 jobs including 700 full-time and 200 contractual. It will enable the company to stream line its decision making process; allowing it to focus its investments on highest growth opportunities. Also, these efforts will enhance its overall efficiency, while driving positive financial growth and expanding its operating margins. Not only this, Citrix anticipates a pre tax saving of $90 million-$100 million a year through the restructuring.
Even as these strategies take their course, the company’s products will play the lead role to boost its growth. Ever since the acquisition of ShareFile; the company continues to make progress in its cloud based data sharing. With the expanding business of multinational companies around the world, securely sharing large quantities of data over the cloud has become a key function of their everyday business routine and ShareFile is just the solution required. To further strengthen its security, Citrix released ShareFile restricted zones during the quarter. The management cites that, this new launch will make ShareFile the most secure cloud-based, document-sharing, syncing and task-flow service in the world.
Looking at the growth potential in cloud computing ShareFile will prove to a cash cow for Citrix in the coming days.
In addition, Citrix completed the acquisition of Sanbolic during the quarter, which is a leader in workload-oriented storage virtualization technologies. The acquisition will allow Citrix to develop a range of differentiated solutions, while improving the economics and reducing the complexity of Windows application delivery and virtual desktop infrastructure (VDI) deployments. Not only this, it’s also a key enabler to its WorkspacePod solution, which is a predefined Citrix software stack that speeds up time at outstanding price performance for DDI solutions. Overall it can be said that Sanbolic will go hand in hand with Citrix’ desktop virtualization products.
Conclusion
Going forward the company expects its full year revenue to be in the range of $3.29 billion to $3.33 billion while EPS is expected to fall between, $3.60 to $3.65. This however, came below the analysts’ consensus of $3.36 billion in revenue with earnings of $3.68 per share. On the positive side, it has a strong forward P/E of 14.95 considering a trailing P/E of 41.15, which indicates that there is significant room for earnings expansion. However, if we look at the stocks it has been on a downward trend for quite some time and if the upcoming results fail to match the analysts’ consensus it will further weigh on its share price. Therefore in the light of these facts investors must have a cautious outlook while investing in Citrix.
