BofA Upgrades Citrix, Says It's Worth $82/Share; Highlights Value From Potential Divestitures

In a report published Friday, BofA Merrill Lynch analyst Kash Rangan upgraded the rating on Citrix Systems, Inc. CTXS to Buy, while raising the price objective from $65 to $82. We are upgrading CTXS to Buy with an $82 PO and raising F17E EPS to $5 on expectations for LT margin expansion in addition to the current restructuring efforts. Following spin-offs by Hewlett-Packard Company HPQ, eBay Inc EBAY and Symantec Corporation SYMC as well as Private Equity acquisitions of Tibco Software Inc. TIBX in their effort to unlock value, activist investor Elliott Management has filed a 13D, disclosing a position of about 7 percent, and published a strategic turnaround plan. "We believe this could potentially serve as a catalyst to unlock value. Although the Elliott Mgmt plan mostly calls for expense cuts it also focuses on divestitures," analyst Kash Rangan said. "If CTXS were to spin out or divest Networking and SaaS businesses and focus on the core Workspace/Virtualization business, we believe that the three separate businesses could actually grow faster and achieve higher margins individually. We estimate a ~$94 valuation under this scenario," Rangan added. The new price objective is based on the assumption of the operating margin reaching 29.5 percent due to cost control.