Citrix's Combined Business Is Worth $99 Per Share: Bernstein

In a report published Tuesday, Bernstein analyst Mark Moerdler crunched up a valuation model for Citrix Systems, Inc. CTXS "New Citrix plan" which has the backing of activist investor (and Board member) Elliott Management.

"The company is shaking up the board, the management team and starting to significantly rationalize the business and divest assets," Moerdler wrote. "We believe activist investors are now catalyzing the long-needed operational improvements to improve margins, increase capital return, and better align the company for growth."

According to the analyst, Citrix's GoTo Businesses are valued at $3.3 billion and a spin of the company could yield an even higher valuation given the segment's "conservative" next 12 month growth rate of 10 percent and long-term pro forma revenue of approximately $671 million. In addition, the valuation does not "give credit" to the fact that as a standalone business it will have much better scale efficiencies.

Moerdler continued that Citrix's NetScaler Businesses are valued in the $2.4 to $2.5 billion range with an upside valuation of $2.8 billion or more as a joint deal that includes ByteMobile and CloudBridge support a higher valuation.

Moerdler also derived a $74 per share value for "Core" Citrix based on a next 12-month earnings per share estimate. As such, the analyst placed a $99 per share valuation to investors for the combined businesses.

Elliott Management also targeted Citrix to repurchase 51 to 60 million shares and the analyst suggested that the proceeds from a potential sale of Delivery Networking (and additional debt) will be allocated towards a share repurchase program. However, even if NetScaler is sold for $2.8 billion and the company takes on $237 million in additional debt, it will only be able to purchase 38 million shares at an average price of $80 which falls below Elliott's target.

Bottom line, Moerdler stated that even though his valuation model derives a $99 per share valuation, "there are so many assumptions" imbedded in the figures. The analyst nevertheless concluded that the involvement of activist investors will ultimately lead to a "much more valuable company."

Shares remain Outperform rated with an unchanged $96 price target.