CTXS signed a pretty big deal with Bejing Stone, a couple
of weeks ago, that gives them a nice entryway into China.
I picked them up on their first upday, I suspect they can
get back to 40.
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10-Aug-00
Trader's Edge: Citrix Systems (CTXS)
[BRIEFING.COM - Jim Schroeder] A very nice run indeed for the supplier of application server software and services over the last few sessions as the stock price has advance better than 40%. The question is, however, is this just a stock that has popped up on the radar screens of the momentum players or has their been a change worthy of bringing longer term investors back into the fray?
Trading Points
The beginning of the turnaround in CTXS appears to be related to a minor wave of bottom fishing as the news at the end of last week was still generally negative. The company was a candidate for the turnaround given that the stock plummeted an eye popping 88% from its March high of 122 and probed a long term support zone. What triggered the relatively impressive upside extension, however, was the report that a distribution agreement with Beijing Stone Investment was signed. This company is a national distributer of electronic products, e-commerce and Internet applications/services in China with 13 branches located on the mainland and sales of roughly $123 mln. The deal gives CTXS an extensive distribution channel, knowledge and connections throughout China where very strong demand for server-based and application portal software is anticipated. CTXS feels their Independent Computing Architecture, which they claim can reduce total costs of IT services by as much as 57%, will be well received. The most important aspect of the deal is that it is expected to help address the international sales slowdown that management noted was a contributor to the companies second quarter woes.
With the stock on the mend to some extent, the next question that must addressed is whether all the bad news has been priced into the stock. The list of concerns is still very extensive with no definitive indications of a turn likely until later in the year. The negatives include the leadership loss/shift in the wake of the profit slump and the stock price meltdown. This is still a developing situation and unfortunately, the company needs strong management as it is in the midst of altering the product mix to electronic licensing from the traditional packaged software that is sold through resellers. In the last quarter licensing rose to 16% of sales from 9%. A change in focus for the sales force to a try and acquire larger accounts also requires direction from the top. Also, both of these changes will have the effect of shifting the revenue stream further out into the future. Licensing revenue is gradually recognized over 3 to 6 months instead of 1 quarter for packaged software and larger accounts take longer to develop and close. Further concerns surround the slow move by corporations into Windows 2000 which slows sales of new CTXS products that work with this operating system. With the timing of the service pack for Windows 2000 still in question, a ramp up of sales could be delayed even further. Lastly are the plethora of shareholder lawsuits related to the earning shortfall which are still hanging over the company.
Momentum players have seen the stock pop back on their radar screens and those that follow technicals would suggest potential for further upside progress based on the relatively impressive advance and the deeply oversold posture once overhead supply in the low to mid twenties and a long term trendline are worked through. |
