Morgan Stanley Upgrades Citrix Systems On Many Levers To Achieve FCF Targets

Although the transition of Citrix Systems, Inc. CTXS to a subscription-based model has been bumpy, its strong expense management and ongoing share buybacks provide the company many levers to reach its free cash flow target, according to Morgan Stanley.

The Citrix Analyst

Morgan Stanley’s Sanjit Singh upgraded Citrix Systems from Underweight to Equal-Weight raising the price target from $113 to $139.

The Citrix Thesis

Citrix Systems’ transition to subscription had accelerated last year, with subscription bookings reaching around 62% of the mix in 2019, up from around 28% in 2017, Singh said in the note.

He added that the transition was largely driven by adoption by new customers and seat expansion by existing customers.

The transition is now entering a more challenging phase, when the company will need to convert existing maintenance customers to subscription, the analyst said.

Singh expressed confidence in Citrix Systems’ ability to meet its free cash flow target of $10 per share by 2022, as the company has multiple levers including its expense discipline, around $1.75 billion in authorized share repurchase capacity and “the growing contribution from the cloud portfolio as revenue from Workspace cloud deals surpass Workspace license/maintenance in under three years.”

CTXS Price Action

Shares of Citrix Systems were trading mostly flat at $123.14 at time of publication Wednesday.