Markets & Finance

S&P: Still Buy Citrix


Citrix Systems (CTXS): Still 5 STARS (buy)

Analyst: Scott Kessler

The shares are weak in early trading after the company said first-quarter revenue and EPS will be a bit lower than expected, reflecting a tough tech spending climate and a one-time restructuring charge. Even though the news is somewhat disappointing, the company's results were relatively solid, given its customer base. We at Standard & Poor's are encouraged by the surprising resilience of large-client, subscription and support revenues, and renewal rates. But we are reducing our first-quarter forecasts for revenues by 4.5% to $142 million and EPS by $0.02, to $0.16. We believe the shares could bottom today, and with a current p-e/growth ratio under 0.9, Citrix warrants purchase.

Merrill Lynch (MER): Reiterates 4 STARS (accumulate)

Analyst: Robert McMillan

The New York State Attorney General's office got a court order yesterday requiring Merrill to overhaul its research process. The company disputes the claim that its research was a "sales hook" for investment banking, stating that its research is conducted with independence and integrity. Any resulting changes that increase perceived objectivity and research quality should be positive for Merrill and other sell-side firms. With the stock trading at 16.6 times our $3.25 2002 EPS estimate -- a discount to its peers -- and with improving market conditions, we at S&P feel the shares remain attractive.

Compaq (CPQ): Still 3 STARS (hold)

Analyst: Megan Graham-Hackett

The company said it expects to meet or exceed Wall Street expectations in the first quarter. Compaq sees revenue of $7.7 billion, above prior guidance of $7.6 billion. However, we at S&P note that its guidance was among the most conservative of the computer hardware group. Compaq had also previously guided for $0.01 EPS in the quarter. We believe the modest upside in revenues came from a less severe sequential decline in PCs and enterprise hardware than Compaq previously expected. We are keeping our $0.28 2002 EPS estimate. With the timing of the HP-Compaq merger clouded, although the shares are at a historic low on a price-to-sales basis, we still have a hold opinion.


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