Citrix Systems Mostly Fits the Profile of a Private Equity Target
Private equity firms such as Thoma Bravo and Vista Equity remain eager acquirers of enterprise software firms, and in many cases still have a lot of capital to deploy. And outside of a relatively large market cap, Citrix Systems (CTXS) , which the New York Post reports has hired Goldman Sachs to explore a potential sale following pressure from activist investor Elliott Management, very much fits the profile of a PE target.
Citrix is a top provider of virtualization software used to host apps and virtual desktops on servers, and also supplies server virtualization software and a slew of networking and security products. The company sports a $13.5 billion market cap after gaining 2.4% on Wednesday, and is reportedly looking for a sale price above $15 billion.
Citrix has been seeing only modest sales growth in recent quarters amid stiff competition from VMware (VMW) and others. However, the company is still expected to produce about $1 billion in free cash flow this year, and a PE owner might see opportunities to boost that number by cutting costs and shedding non-core businesses.At a time like this, that's likely enough for major PE firms to at least kick the tires on Citrix.
What's Leading AMD's Stock to Soar TodayAdvanced Micro Devices' ( AMD) stock is up around 10% in Wednesday trading as of the time of this post. There appear to be a few different factors at work.
- Chip stocks in general are having a good day. The Philadelphia Semiconductor Index (SOXX) is up 3%, and has made fresh 52-week highs. A Digitimes report about top chip contract manufacturer Taiwan Semiconductor (TSM) seeing an uptick in orders for chips using its cutting-edge 7-nanometer (7nm) manufacturing process might be helping.
- Digitimes also reported that its supply chain sources expect strong demand for AMD products during the second half of 2019, as the company rolls out 7nm CPUs and GPUs.
- After the bell on Tuesday, Nomura launched coverage on AMD with a Buy rating and $33 target, while forecasting share gains and strong profit growth in the coming years. The firm also launched coverage on Intel (INTC) with a Buy rating, while assigning Neutral ratings to Nvidia (NVDA) and Xilinx (XLNX) .
- AMD has a decent-sized short interest: 114.8 million shares (12% of the float) were shorted as of March 14. Some of those shorts appear to be covering today.
AMD's growth outlook for the second half of the year looks pretty healthy right now. The company's 7nm CPU launches will put it on stronger competitive footing in the desktop and server CPU markets, and it's also set to benefit from the launch of 7nm mid-range GPUs, growing notebook processor design win activity and GPU wins for cloud gaming services, not to mention the clearing of a GPU inventory buildup that followed the bursting of the crypto bubble.
But with that said, AMD's stock is now up 61% on the year, and over 25% just over the last three weeks. At this point, it's probably better for would-be investors to wait for a pullback.To see Tech Check coverage from the previous trading day, click here.
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