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BULL/BEAR MARKET


Citrix Systems - Surviving the Mayhem

03/26/20 04:52:18 PM
by Matt Blackman

Covid-19 has been a wakeup call. But not all stocks took a beating.

Security:   CTXS
Position:   N/A

Covid has provided us with a very real and painful demonstration of our preparedness (or not) to handle a serious health threat and what resources are needed to adequately cope. Hopefully some valuable lessons were learned, especially by government decision makers. And markets have responded with a vengeance, but amid the mayhem a few stocks have held up reasonably well.

Citrix Systems, which provides "a digital workspace platform that gives employees everything they need to be productive in one unified experience" according to its website, is an example. One reason why it has done so well of late is that it provides software to physicians to manage medical records, which have been severely tested.

With a market cap of $16.3 billion, CTXS earnings rose 36% in the latest quarter and are up nearly 29% in the last year on pre-tax income of $176 million. With a trailing P/E of 21.29, I don't consider it overvalued considering the extremely high ratios typically found in this space. For example, P/Es for companies in the Software Application industry currently range from negative to a very lofty 1,900 (LINE Corporation).

Figure 1. Daily chart of Citrix Systems is up since the end of February and remains above its 100-day moving average, as opposed to the majority of stocks which are down significantly.
Graphic provided by: Freestockcharts.com.
 
Technically, CTXS was still up more than 16% year-to-date as of March 20, 2020 and has handily outperformed its Software Application peers since mid-February as we see in Figure 1. In the last year, the stock outperformed the S&P500 by 25% on a relative strength basis.

Figure 2. Citrix together with the Software Application industry (purple line) comparing how they’ve performed over the last year.
Graphic provided by: Freestockcharts.com.
 
Citrix Systems, like Costco Wholesale Corp, is a stock that should hold up reasonably well should this downturn worsen in the coming weeks to provide investors some safe haven from market travails.

On the flip side, if there is a fast recovery and markets recover, it should also generate above average returns. But as always, it's important to have a written trading plan with well positioned stops to exit should the unexpected happen.


Suggested Reading:

Costco - A Solid Stock in a Storm?

Recession Watch - Yield Curve Turns Negative Again

The Treasury Yield Curve Inverted Again - Should We Be Worried?



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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