Citrix Systems, Inc.(NASDAQ:CTXS)’s stock plunged more than 5% and now there are concerns over the revenue growth of the business software maker, which is likely to slow next year as firms purchase fewer personal computers and pay for lesser upgrades to the operating systems on the machines that they already possess.
Adam Holt, analyst at Morgan Stanley cast a spotlight on the challenges that Citrix is experiencing in a research report submitted on Monday. The report concluded that the firm’s pipeline of deals will start to dry up the following year, making it more difficult to generate the revenue to catalyst the stock prices higher. He downgraded his rating on the shares to ‘equal weight’.
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Based in Fort Lauderdale, Citrix did not immediately reply to requests for comments on Monday.
Citrix specializes in ‘virtualization’ software, which happens to be one of the hottest trends in computing during the past two years. The term refers to coding that helps in reducing the costs of running data centers by enabling a single computer to work like multiple machines. The increasing demand for virtualization software had increased the stock price for Citrix by 34% this year before the sell-off on Monday.
The company’s revenue had grown by 18% to $1.2 billion through the initial half of the year. The firm earned $160 million in the first half of the year, up 3% from the same time last year.
Holt predicts Citrix to deliver solid figures through the remaining year before getting into trouble next year. Commercial demand for personal computers seems to be fading amid uncertainty about the economy and the rising popularity of cheaper tablet computers. A few new PCs in data centers and offices usually mean lesser sales for software makers like Citrix that serve the corporate market.
Holt trimmed his projections for 2013 sales of Citrix’s software licenses and lowered hi price target for the company’s stock from $90 to $85.