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Citrix Hits 16-Year High On Strong Q1 Pace; Price Targets Hiked

After Citrix Systems ( CTXS ) beat Wall Street’s Q1 forecast — and raised its full-year outlook — investors sent Citrix stock flying as much 12% higher Thursday to 90, a 16-year high. RBC Capital and Needham analysts hiked their price targets, though neither upgraded their ratings. Citrix stock eased but was still up nearly 5%, near 84, in early afternoon trading in the stock market today . After Wednesday’s close, the enterprise software developer, specializing in desktop virtualization, said Q1 adjusted earnings rose 81% to $1.18 per share, where analysts polled by Thomson Reuters expected 92 cents. Revenue rose  8.5% to $826 million, well beyond analysts’ $789 million consensus. With its 93 IBD Composite Rating, Citrix is the highest-ranked issue in IBD’s Computer Software-Specialty Enterprise industry group. Shares of the largest company in the group by market value, VMware ( VMW ), were down a fraction. Thursday morning, Citrix and CA ( CA ) traded places, with Citrix now No. 2, with a $12.9 billion market cap, vs. CA’s $12.8 billion. CA stock was up more than 1% Thursday afternoon. Analysts Thursday were impressed with gains so early in Citrix’ reorganization process that included laying off 1,000 employees and contractors in December and January. But they’re waiting for Citrix to fully execute, most significantly waiting for Citrix to spin off its GoToMeeting line into a freestanding, publicly traded company before year-end. “The ongoing restructuring at CTXS … (including) headcount reductions and product card rationalization, many expected these disruptions to impact top-line growth,” said Needham analyst Scott Zeller in a Thursday research note. He hiked his price target on Citrix stock to 96 from 90. RBC analyst Matthew Hedberg raised his price target from 80 to 90. He said that Q1 license revenue grew the most in 11 quarters, and total revenue growth was the best in eight. “Another solid quarter, as outperformance has been marked over the last three quarters thanks to the operational initiatives introduced last year and the focus on the core strategy of the secure delivery of apps and data,” he said in a Thursday research note. Citrix said it may file a Form 10 registration statement with the Securities and Exchange Commission for the GoTo spinoff before the end of Q2.

Citrix Grows EPS, Sales Faster Than Modeled After Reorganization

Apparently not too distracted by its reorganization, the highest-rated issue in IBD’s Computer Software-Specialty Enterprise industry group,  Citrix Systems ( CTXS ) boosted its Q1 earnings faster than analysts had expected. Reporting after the market close, the maker of cloud management software said Q1 adjusted earnings rose 81% to $1.18 per share, where Wall Street expected 92 cents. Revenue rose 8.5% to $826 million, while analysts polled by Thomson Reuters had modeled $789 million. Citrix stock was up nearly 7% in after-hours trading, following the company’s Q1 earnings release. Shares closed up a fraction, at 80.56, in the stock market today , just 4% off a four-year high of 84.17, hit on Oct. 28. “I am very pleased with our performance this quarter on both the top line and bottom line,” Citrix CEO Kirill Tatarinov said in the company’s earnings release. “The progress we made in refocusing the company — simplifying our portfolio and sharpening our message — is starting to pay off. “We are seeing a strong improvement in our operating margin, and our focused strategy has made it easier for our field teams and channel partners to execute; consequently, we saw improvement in the top line. It gives us a measure of confidence that we are on the right path, and it gives us opportunities to solidify our leadership position in our core areas.” Q1 marks Citrix’s fourth consecutive quarter of double-digit earnings growth following three quarters of 2%-to-7% growth. Profits have outperformed sales, up by only single-digit percentages, now for seven straight quarters. Last week, Robert W. Baird analyst Steven Ashley reiterated an outperform rating with an 85 price target on Citrix stock. He said Baird had surveyed 96 Citrix channel partners and got back mixed results, “consistent with management’s guidance that factored in normal (Q1) seasonality and allowed for possible disruptions from reorganizational activity.” “We continue to believe prospects for improved channel performance are underappreciated,” Ashley said. The company’s reorganization included the layoff of about 1,000 employees and contractors in December and January, the pending spinoff of Citrix’s GoTo lines and a $200 million annual reduction in other operating expenses. In February, Kevin Parker, former CEO of Deltek, was named chairman of the GoTo spinoff, expected to be completed late this year. The third-largest in IBD’s Computer Software-Specialty Enterprise industry group, Citrix boasts a $12.45 billion market cap, half the size of the largest, VMware ( VMW ), but barely smaller than CA ( CA ). However, VMware carries an IBD Composite Rating of 47, compared with CA’s 54 and Citrix’s 92, meaning Citrix is outperforming  92% of all S&P 500 stocks based on earnings, sales, institutional ownership and other fundamental metrics.

‘Elephant’ Intel Dances, But 12,000 Layoffs Could Signal Recession

No. 1 chipmaker Intel ( INTC ) will cut 12,000 jobs by mid-2017, and that will help kick off a “recession” with nearly 400,000 tech positions to be cut this year, a Global Equities Research analyst predicted Tuesday. Late Tuesday, Intel added another domino to the layoff train, joining  VMware ( VMW ), Yahoo ( YHOO ), BlackBerry ( BBRY ), Autodesk ( ADSK ) and NetApp ( NTAP ), which recently announced plans to collectively lay off 5,125 employees. Intel’s 12,000-cut represents 11% of its global workforce. Global Equities Research analyst Trip Chowdhry says it’s just a drop in a 369,000 bucket (his prediction for tech layoffs that will be announced this year) and argued against a Federal Reserve rate increase amid what he calls a likely oncoming recession. PC Transition Will Be ‘Messy’ On Wednesday, Wall Street was largely split on Intel’s mixed Q1 , with at least five analysts still rating Intel stock a buy. At least two analysts cut their price targets, however, and another downgraded Intel stock. In early afternoon trading on the stock market today , Intel stock was up 1.5%, near 32. But shares are down 8% for the year vs. a 3% decline in IBD’s 39-company Electronic-Semiconductor Manufacturing industry group. For Q1 ended April 2, Intel reported $13.7 billion in sales and 54 cents earnings per share, up a respective 7% and 20% year over year. The consensus of 45 analysts polled by Thomson Reuters expected $13.8 billion and 48 cents. PC chip sales rose 2%, but that trailed stronger growth in data center, Internet of Things and security — up a respective 9%, 22% and 12%. Nonvolatile memory chip sales fell 6%. Current-quarter sales guidance for $13.5 billion, plus or minus $500 million, lagged the consensus for $14.2 billion. Intel’s April quarter benefited from an extra week. Intel’s transition from a PC-oriented company will be “messy,” Credit Suisse analyst John Pitzer wrote in a research report. Late Tuesday, CEO Brian Krzanich said the layoffs would allow Intel to save $750 million in the first year and $1.4 billion per year starting by mid-2017, so that the company can “intensify” investments in key growth areas. Pitzer reiterated an outperform rating and a 40 price target on Intel stock. ‘Trying To Be More Nimble’ PCs represented 55% of Intel’s Q1 sales vs. 58% a year earlier. In 2011, the client computing group accounted for 65% of Intel’s revenue. The company is aiming to trim that to 50%, which Semiconductors Advisers President Robert Maire calls a “milestone.” “Intel is certainly trying, perhaps with varying degrees of success, to get revenue from many other markets,” Maire wrote in a research report. “While individually, none hold a candle to the PC market, collectively they have been a great offset.” Unlike other companies, Intel isn’t in the red while transitioning, Maire noted. He likened the restructuring — which includes transitioning CFO Stacy Smith into a role leading sales, manufacturing and operations — to teaching an elephant to dance. The elephant theme was popular Wednesday. “Who says elephants can’t dance?” Summit Research analyst Srini Sundararajan queried in a report. Sundararajan reiterated his buy rating and 37 price target on Intel stock. “Keeping (2016) capital expenditures the same ($9.5 billion at the midpoint) while proceeding with a layoff confirms that Intel is trying to be more nimble and refocusing itself away from the PC,” he wrote in a report. During Q2, Intel will recognize a $1.2 billion restructuring charge. But the second half of 2016 looks promising, Sundararajan said. Intel dropped full-year guidance to mid-single-digit growth vs. earlier views for mid- to high-single-digit growth. Sundararajan says this suggests a big second-half-year recovery, with revenue up 13%.