Analyst Note| Dan Romanoff, CPA |
Narrow-moat Citrix Systems reported weaker-than-expected results on headline numbers. In an absolute sense, guidance was raised for the year, with Wrike adding more to the top line than component shortages detracted. That said, the outlook includes lower profitability based on dilution from Wrike. Given management’s recent track record of reporting quarterly upside to guidance, we believe the outlook would err on the side of caution. That said, we note the disconnect between management’s expectations on converting burst licenses from the first quarter in 2020 and the struggle to execute on those companies that are still sorting out their long-term IT plans. We remain generally in line with management’s long-term financial targets and think revenue should accelerate throughout 2021, consistent with management commentary. That said, COVID-19, the transition to the cloud, and the addition of Wrike make modelling challenging through 2021. We are lowering our fair value estimate to $149 per share from $154 based on a lower near-term profitability outlook, but we still see the stock as undervalued.