Citrix Systems, Inc. (NASDAQ: CTXS) sells virtualization technologies such as Virtual Apps and Desktops for desktop virtualization and Citrix Virtual Apps for application virtualization. Citrix Endpoint Management is also available for mobile device management, as is Citrix ADC for application delivery and Citrix SDWAN for routing, security, and WAN monitoring.

Why should investors Book Profits?

• Significantly leveraged balance sheet: The company is exposed to a substantially more significant balance sheet risk than its peers, with a Debt/Equity ratio of 8.32x as of September 30, 2021, compared to the industry median of 0.16x, implying a higher balance sheet risk. Furthermore, the risk protection matrix is inadequate, with Net Debt as of September 30, 2021, about 11.25 times EBITDA. This reflects the fact that the company is exposed to greater balance-sheet risk.
• Sell off in Tech stocks: Over the last few trading sessions, tech stocks have taken a significant beating as a likely interest rate hike has weighed on the valuation of technology stocks. The broader technology benchmark index has fallen by more than 10% since its recent highs. As a result, we anticipate that a more significant selloff in technology shares would weigh on CTXS shares because its balance sheet is substantially stretched.
• Technical weakness: On the daily price chart, CTXS stock is encountering critical resistance near the 200-day SMA, and this comes after a solid gain in its shares over the last few trading sessions. The RSI is reversing on the daily price chart, and the leading momentum indicator, the MACD, is declining.
  

Valuation methodology (Illustrative): Price to Earnings -based valuation

Analysis by Kalkine Group

Stock Recommendation:

Given the sharp selloff in the technology stocks, we believe companies with a relatively stretched balance sheet could witness a deep cut from the current trading levels. Moreover, a stronger dollar on the back of heightened tension between Russia and Ukraine and rising yields on the US treasury bond yields will further weigh the CTXS’s financials. Hence, based on the above rationale and valuation done using Price to Earnings based multiple, we recommend a “Sell” rating on the stock at the closing price of USD 105.55 (as of January 28, 2022).

3-Year price chart (as of January 28, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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