Citrix Systems Inc.

CTXS Details

Citrix Platinum Plus Partner Gets Recognition: Citrix Systems Inc. (NASDAQ: CTXS) is engaged in providing virtualization, networking, and cloud computing solutions to organizations across the globe. On May 11, 2021, Citrix Platinum Plus partner called DLS Technology Corporation informed the market that it has been named as the global 2020 Citrix Innovation Award Winner for Partners. The recent recognition was as a result of extraordinary performance of its team in bringing a hybrid cloud Digital Transformation solution to The Ottawa Hospital.

CTXS’ Solutions Selected by The Ottawa Hospital: Recently, the company informed the market that The Ottawa Hospital has built a Digital Health Network by utilizing solutions from CTXS, in order to offer clinicians and staff with modest, safe and consistent access to the systems and applications.

1QFY21 Key Highlights: During the quarter, the company reported non-GAAP earnings of $1.42 per share, down by 17.9% on a year-over-year basis. Revenues for the quarter stood at $775.77 million, down by 10% from the prior corresponding period. The top-line was primarily impacted by lower Workspace revenues along with decline in App Delivery and Security revenues. During the quarter, SaaS revenues were $171 million and accounted for ~50% of total subscription revenues. SaaS revenues went up 40% on pcp. During the quarter, the company reported total operating expenses of $540 million, down ~0.7% year over year. Non-GAAP operating margin came in at 27%, down 400 basis points from the prior corresponding period. The company exited the period with cash and cash equivalents and investments of $510 million. During the quarter, the company wrapped the buyout of Wrike for $2.25 billion. The purchase added $7 million to SaaS revenue in 1QFY21 and contributed $150 million SaaS ARR.

Revenues Highlight; Analysis by Kalkine Group

Key Risks: On the flip side, transition to subscription-based model is likely to exert pressure on Product and License revenues as well as Support and Services revenues. Rising investments on portfolio expansion and product developments are expected to weigh on the company’s margins.

Outlook: For FY21, the company revised its outlook. The company now expects revenues to be in the range of $3.38 billion and $3.42 billion, up from the prior outlook of $3.33-$3.26 billion. Moreover, non-GAAP earnings per share are now expected to lie in the ambit of $5.60 and $5.80, down from the prior guidance of $6.20-$6.40.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: 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. 

Stock Recommendation: Over the last one month, the stock went down by ~3.2%. The stock made a 52-week low and high of $111.26 and $173.56, respectively. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). We believe that the company can trade at a slight premium as compared to its peer median, considering its robust adoption of cloud-based services, growing abundance of IoT, AR/VR devices and enhanced implementation of 5G along with expanding international clientele. For the purpose, we have taken peers like VMware Inc (NYSE: VMW), Microsoft Corp. (NASDAQ: MSFT), to name a few.  Considering strong adoption of the company’s offerings, geographical expansion, robust SaaS based offerings, acquisition synergies, decent revenue outlook and valuation, we give a “Buy” recommendation on the stock at the closing price of $117.06, down by ~1.75% on 7 June 2021. 

CTXS Daily Technical Chart, Data Source: REFINITIV

Cirrus Logic Inc.

CRUS Details

CRUS Inks Deal with Elliptic Labs: Cirrus Logic Inc. (NASDAQ: CRUS) is a fabless semiconductor supplier that is involved in activities of manufacturing, developing, and marketing analog, mixed-signal, and audio DSP integrated circuits. On May 4, 2021, the company joined forces with Elliptic Labs, a worldwide artificial intelligence software company to verify and enhance Elliptic Labs’ AI Virtual Smart Sensor Platform on CRUS’s newest smart advanced amplifiers for smartphone, Personal Computers, laptop, and IoT customers.

A Look at 4QFY21 Key Financial Highlights: During the quarter, the company reported non-GAAP earnings per share of 66 cents, down from 0.68 cents per share reported in the year-ago period. In 4QFY21, total revenue stood at $293.5 million, up ~5%, or from the figure of $279.29 million, reported in the year-ago period. The increase in top-line was mainly due to an increase in penetration of its audio solutions in smartphones and robust momentum in audio and haptic solutions. During the quarter, non-GAAP gross profit came in at $148.4 million, increased by ~1.4% on pcp. The company reported non-GAAP operating expenditure of $106 million, up ~7.4% year over year. CRUS is a cash-rich company with a strong balance sheet. The company has $497.9 million of cash, cash equivalents and marketable securities at the end of the quarter. Notably, the company did not have any long-term debt as of March 27, 2021.

Revenues Highlight; Analysis by Kalkine Group

Key Risks: The company is exposed to stiff competition from peers, adverse currency translations and a volatile macroeconomic environment.

Outlook: For 1QFY22, CRUS anticipates revenues to be in the range of $240 million and $280 million, depicting a rise of 7% year over year, at the mid-point. The company opines that it’s no debt obligation places it well to sail through the COVID-19 led turmoil and keep leveraging its growth opportunities. 

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: 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. 

Stock Recommendation: Over the last six months, the stock went down by ~6.4%. The stock made a 52-week low and high of $55.3 and $103.25, respectively. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price of an upside of low double-digit (in percentage terms). We believe that the company can trade at a slight discount as compared to its peer average, considering its stiff competition, adverse currency translations, volatile macroeconomic environment, and customer concentration risk. For the purpose, we have taken peers like Maxim Integrated Products Inc (NASDAQ: MXIM), NXP Semiconductors NV (NASDAQ: NXPI), to name a few.  Considering the company’s track record of robust liquidity position, decent 3QFY21 performance, encouraging outlook and valuation, we give a “Buy” recommendation on the stock at the closing price of $77.74, up by ~0.13% on 7 June 2021.

CRUS Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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